Monday, February 28, 2022

Apple letter fails to dissuade Dutch antitrust authority from imposing 6th fine over alleged non-compliance in Match Group case

Reuters obtained a letter dated today by which Apple explained to the Autoriteit Consument & Markt (ACM; Authority for Consumers & Markets)--the Dutch competition agency--why it believes to be in compliance with a recent App Store antitrust ruling requiring alternative in-app payment options.

To no avail though: according to a subsequent Reuters story, a sixth weekly €5 million ($5.7 million) fine has been imposed on Apple. Actually, if I understand the process correctly, this is initially just a threat and theoretically Apple could avoid paying the fine by bringing its conduct into compliance with what the ACM believes it can require Apple to do under its recent ruling. Practically, we can ignore the difference because the bottom line is that Apple's position is clearer than ever in light of the letter Reuters reported on earlier today. Apple genuinely believes to be acting in good faith--and I can actually see why.

There's a cap for those fines at €50 million ($57 million)--the equivalent of ten weeks of €5 million each.

As I explained in my previous post, the ACM should take a closer look at the complainant's own behavior: Match Group's intransparent and inconsistent Tinder pricing is of far greater concern to consumers than whether Apple or Match Group get those 30%. The App Store as a whole is way more important than Tinder, sure. But the ruling is narrowly confined to the Dutch dating-app market, and the argument is that Apple's conduct harms Dutch consumers using dating apps on iOS devices. There is actually zero evidence that Match Group would pass any savings along to end users except for (perhaps) a temporary PR & marketing stunt. In the long run, they'd just rake in more money and consumers wouldn't benefit.

The Tinder pricing issue that the Mozilla Foundation and Consumers International have researched does harm consumers. There can be no doubt that if this effort by the ACM really was about whether Dutch consumers are overcharged by iOS dating apps, the logical starting point for an investigation would be Match. I can't take those news of non-compliance sanctions seriously as long as the ACM, which is not just an antitrust watchdog but also has a broader responsibility for consumer protection, isn't defending consumers against a pricing scheme under which some reportedly paid fives times more than others for the very same service.

I'll try to find out more about the Dutch situation. If, however, the ACM doesn't really care about whether Dutch dating-app users are treated fairly, then maybe they should finally "agree to disagree" with Apple, stop those weekly fines and let the appeal run its course.

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Sunday, February 27, 2022

Tinder pricing scandal: Dutch regulator should also investigate Apple antitrust foe Match Group if 'C' in 'ACM' truly stands for Dutch 'Consumers', not American 'Companies'

Who is hurting consumers more:

  1. a dating-app maker that clandestinely charges some of its users up to five times more for the same service than it charges others; or

  2. a smartphone operating system maker that transparently and consistently imposes a 30% tax on payments in dating apps (and roughly the same for out-of-app payments)?

Sorry to say so: even a vocal App Store critic like me can't possibly answer the question with "Apple."

Unfortunately, the correct answer is a company that co-founded the Coalition for App Fairness. How is it fair to intransparently charge some users five times more than others, for the very same thing?

Next question; closely related to the first. Who is helping consumers more:

  1. non-profit foundations Mozilla and Consumers International, who investigated Match Group's pricing strategies and proved that "Tinder Plus can offer up to 31 unique prices in a single country, and that older users are often charged more" (and that "Tinder's opaque, unfair pricing algorithm can charge users up to five times more for same service"); or

  2. competition watchdogs who fire cheap shots at Apple with legally and technically questionable allegations of non-compliance with a ruling that Apple has every right to appeal?

Admittedly, it was a leading question, but that's because the facts are what they are.

Double standards never work in the long run. At least not in competition policy and enforcement.

On the one hand, something must be done about Apple's App Store monopoly. The iPhone maker continues to drip-feed us with microscopic concessions such as removing a prohibition of app transfers from its requirements for getting a small business discount. The real issue--which is app review and, therefore, the unavailability of alternative app stores--is still far from being tackled other than through some legislative initiatives.

On the other hand, this doesn't mean that anything "anti-Apple" is necessarily meritorious, much less principled.

The Dutch Autoriteit Consument & Markt (Authority for Consumers & Markets; ACM)--sort of the Dutch equivalent of the United States Federal Trade Commission--has the potential to make a very significant contribution to the fight against the mobile app store duopoly if it makes prudent decisions that other jurisdictions adopt. Also, EU competition chief Margrethe Vestager is wielding a huge stick, though she has so far not used it much against App Store abuse (other than the Statement of Objections in the Spotify case, which is good but limited to direct competition by music streaming app makers with Apple). But both the ACM and Commissioner Vestager, whose condemnation of Apple's alleged non-compliance with the rule of law actually raises some rule-of-law questions in and of itself, should really think again--and think hard--about whether it reflects sound judgment to be in the tank for Tinder maker Match Group against Apple even to a post-factual extent and while turning a blind eye to Match Group's own questionable practices that harm consumers.

Dating apps were never the most uncontroversial app category to begin with. Why did the ACM focus on that field--when there is no reason why the Netherlands would have to care more about dating apps than literally any other country in at least the Western hemisphere? It's a bit of a mystery. But I'd have welcome anything that helps address the App Store situation, hoping that whatever works in one segment of the app market today may work in another--or all others--tomorrow.

Tinder's chief lawyer testified in the U.S. Senate that Match Group's apps are all about building "meaningful relationships," which is the height of hypocrisy not because I would (as I could not) deny that meaningful relationships indeed come into being as a result of online dating--but because that's just a part of the picture. The fact of the matter is that a lot of it is about cheating on partners, and the line between dating and prostitution is blurred. Yeah, maybe Match Group has some rules that users theoretically get thrown out if they ask for money, but do they enforce those rules vigorously? Weren't their credible media reports at the start of the pandemic that restrictions on a certain industry resulted in parts of the world's oldest profession increasingly going about their business via dating platforms?

Furthermore, just like Apple's app tax is arbitrary, so are the fees charged by services like Match Group's Tinder. They exploit network effects, just that compared to Apple they've made a negligible contribution to innovation. Chances are Apple innovates more on any given day than Match Group did in its entire corporate history.

Sure, dating apps can serve a wonderful purpose, and I'm not a hypermoralist, but Match Group distorts the reality of online dating in general and its own services in particular.

Even if we assumed for the sake of the argument that Match Group is eligible for sainthood among dating-app makers, the pricing scandal that Mozilla and Consumers International uncovered is truly shocking.

The Dutch ACM is not just an antitrust enforcement agency. They have a broader mandate, which is why I likened them to the FTC. They do look into all sorts of issues. Now, the problem they are facing here is simply this: people wonder why they are pursuing their Apple case at all, given that it benefits Match Group and a few other foreign companies, but no major Dutch player, and the answer is the "C" in the Autoriteit's name. The argument is that it's about Dutch consumers. Now, if there is one huge problem affecting dating-app users in the Netherlands that is worth looking into and addressing, the ACM should follow up on Mozilla and Consumers International's first-rate investigative work. Those non-profits do the job that organizations like the ACM should be doing in terms of "your tax dollars (or euros) at work."

They're not going to abandon their App Store case, and I wouldn't even want that. But they should sit back and think again. They should keep a low profile in this enforcement context because Apple's requirement for submitting a separate app for the Dutch market is reasonable even in the eyes of an Apple critic like me. Commissioner Vestager supported the ACM in her recent Berkeley speech despite DG COMP neither having reached any conclusion on the App Store (not even in the Spotify case) that comes close to the underlying Dutch ruling nor DG COMP having to resolve that Dutch enforcement dispute (which will be for Dutch courts, and possibly the European Court of Justice if a question of EU law needs to be sent to Luxembourg).

Maybe the Match Group case against Apple in the Netherlands isn't all that great, neither legally nor technically or politically. Maybe it's like a company putting out a first product and then doing better on the second. There are presumably plenty of complaints, some of which will relate to app categories with a much better reputation and will come from companies that don't charge up to five times more if an older user pays for a particular service than if a younger one does, without at least telling everyone that this is the case.

The ACM should build a better story, a better case, and ultimately impose better remedies--remedies that can clearly be enforced in a way that makes a positive impact. Apple is playing sort of a legalistic game, but it's a pretty universal rule--which the European Commission is also perfectly aware of--that if someone has to comply with a ruling, anything counts as compliance that is not based on a wholly unreasonable interpretation or application of the underlying decision. The standard is not whether another position may make more sense. I would even agree that the ACM's apparent position on what Apple should be doing in the Dutch dating-app market is more reasonable than Apple's--but that doesn't make Apple's wholly unreasonable.

Regrettably, the Tinder pricing scandal is also unhelpful to Epic Games. The Fortnite maker co-founded its Coalition for App Fairness with Match Group and Spotify. It's bad enough that an amicus brief proposed by the CAF was rejected by the United States Court of Appeals for the Ninth Circuit, the most important regional appeals court in the world--it's arguably more important to the global economy than almost any national top court. Now a CAF co-founder faces a major credibility problem when it comes to the question of who really overcharges app users.

It didn't help Epic that some internal emails surfaced in the Apple litigation that called its motives into question. But that was really just anecdotal evidence as Judge Gonzalez Rogers called it toward the end of the trial. And Judge YGR may dislike impulse purchases, especially by (Fortnite-playing) kids, which is why she sort of invited litigation against both Apple and Epic over that question. Then dating apps are also about impulse purchases, and there is no type of purchase where transparency is more critical than (in-app) impulse purchases.

As an advocate for the rights of app users not to be overcharged by abusers, Match Group has zero credibility left. Literally zero. This will have major ramifications also for its lobbying efforts. Hopefully more companies will advocate for App Store reform--companies who really practice what they preach when it comes to "App Fairness." If they're large and have been around for a long time, someone will always find something to criticize about what they did, even if it happened ages ago--but at least they shouldn't be App Unfairness hypocrites.

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Thursday, February 24, 2022

EU competition chief's harsh words on Apple's Dutch antitrust issue presuppose non-compliance, which is very debatable

I just reported on Apple's latest patent settlement (with Japan's national patent licensing firm IP Bridge). This story is now about Apple's App Store monopoly, and an utterance by the EU's competition chief that I don't agree with.

The European Union is fortunate to have two really strong commissioners in key positions at the same time: both Margrethe Vestager (competition enforcement and digital industry) and Thierry Breton (who is dealing with a lot more than just the EU's Single Market) are power brokers, great communicators, and shakers and movers. At different times I had doubts about either one. I was worried about Mrs. Vestager being on an anti-American crusade, and I still don't believe in that Apple-Ireland "state aid" case because the issue is political, not one of (existing) competition law. However, most of the time she's right, also in the opinion of the EU judiciary. With Mr. Breton my concern came from the opposite direction, but his resistance to a clampdown on some major standard-essential patent holders ultimately proved right, as Daimler's settlement with Nokia and subsequent signing of a license agreement with the Avanci pool tells us that the sky isn't falling on Europe's automotive industry. Mr. Breton has a sense of Europe's weaknesses and is serious about addressing them.

The jury is still out on whether they will accomplish their goals. The problems Europe faces--such as with Apple and Google--are difficult to solve. Previous generations of politicians failed. Mrs. Vestager and Mr. Breton will either go down in history as the ones who put Europe's industrial policy on the right track for the Digital Age, or their efforts will ultimately be judged as "too little, too late"--or the outcome could land in a gray area between those two scenarios.

Today, however, I saw articles such as Techcrunch's story on the EU swiping at Apple that made me aware of an acceptance speech Mrs. Vestager gave in Berkeley, CA, where she received the Riesenfeld Memorial Award. The following passage strikes me as gratuitous Apple-bashing:

"Effective enforcement, which includes the [European] Commission having sufficient resources to do so, will be key to ensure compliance. Some gatekeepers may be tempted to play for time or try to circumvent the rules. Apple’s conduct in the Netherlands these days may be an example. As we understand it, Apple essentially prefers paying periodic fines, rather than comply with a decision of the Dutch Competition Authority on the terms and conditions for third parties to access its app[ ]store. And that will also be one of the obligations included in the [Digital Markets Act]."

There's that qualifier or disclaimer: "As we understand it ..." But even those four words don't justify prejudging the Dutch situation, and denying Apple the right to disagree on what appears to be a reasonable basis. Let's look at this issue from the perspective of the rule of law:

  • Yes, the Dutch Authority for Consumers & Markets (ACM) has fined Apple for five weeks in a row, to the aggregate amount of €25 million by now (with a cap of €50 million being approached soon). Here's my commentary on the fifth weekly fine, which was threatened for this week.

    But:

  • The ACM is an executive government agency. Its decisions are reviewable by the courts of law, in this case potentially all the way up to the European Court of Justice, which also has the power to toss or affirm Mrs. Vestager's decisions.

  • A court allowed the ACM to go ahead for the time being and force Apple to comply. However, Apple is still appealing the underlying decision, and no court of law has held Apple to be out of compliance with the ACM's decision.

  • All we have is the ACM itself saying week after week that Apple is not doing enough to comply. So, what exactly is it that leads the ACM to deem Apple to be out of compliance? The only issue that the ACM specified in its most recent statement on this enforcement dispute is the requirement to submit a separate app for the Dutch market. There are other--but totally unspecified--issues.

  • The Google-Apple mobile app store duopoly must be broken. However, if a regulatory agency or even a legislature in one small country orders Apple to support alternative payment systems there, it's not unreasonable for Apple to argue that all it has to do is to allow the submission of--and grant approval to--apps that are designed for that particular market and meet those requirements.

  • There is a possibility--and that's undoubtedly the case in the Dutch market now--that developers won't benefit from a decision in practice. The market may be too small to create a separate app and have the existing user base migrate; and with Apple imposing an app tax of 27%, developers couldn't even pass on any savings to end users. That's understood. But that's not necessarily non-compliance. It may just be a structural issue with a decision that didn't go far enough.

  • Some jurisdictions--such as the Netherlands--may allow a government agency to enforce an antitrust decision while it is being appealed. By contrast, in the United States the government firstly has to go to court and seek an injunction from an impartial judge. But Dutch lawmakers apparently didn't elect to give the ACM the power to really impose its own interpretation and application of a decision on private companies like Apple. The ACM faces a limit of €50 million; that maybe a draconian sanction for most companies, but not for Apple, and the alternative would have been a percentage of worldwide sales (which is what the EU Commission can impose, subject to court review) or even the possibility of sending executives to prison (which would obviously have to be decided by a court in the end, but the law could allow the ACM to initiate the process).

    Given that Dutch lawmakers decided that any sanctions for disagreeing with the ACM on the scope of its decisions should be limited. That makes it a legitimate choice for Apple to take its chances and continue with its appeal.

Having said that, I believe Mrs. Vestager should have given Apple the benefit of the doubt here. In dubio pro reo. That's an old European and even pretty universal concept. Mrs. Vestager is one of the most important players in the global fight against app store monopoly abuse. She should avoid coming across as biased. Here, she simply takes sides with the Dutch antitrust authority--when she doesn't even have a basis at this stage to be convinced of whether the underlying decision by the CMA was right (much less whether the ACM is applying it appropriately now), given that the Commission itself has not made a single final decision against Apple on App Store issues, and the only preliminary decision (the Statement of Objections in the Spotify case) that it has handed down deals with the narrow issue of a third-party app maker competing with an Apple offering (Apple Music), while the Match Group can't (and to the best of my knowledge doesn't) claim that Apple is competing in the dating-app business.

So the ACM is far ahead of DG COMP with respect to App Store monopoly abuse both on the merits and in procedural terms. It's simply too early for Mrs. Vestager to endorse the ACM's course of action. DG COMP and the CMA obviously communicate through the European Competition Network. Still, if DG COMP believes that Apple is abusing its App Store monopoly by requiring the use of its own in-app payment (IAP) system even when app makers don't compete with Apple as directly as Spotify does with Apple Music, then why leave it to its smaller Dutch counterpart to enforce the law?

And why does Mrs. Vestager just ask for more resources for her institution when the very best and most effective way to enforce the Digital Markets Act is actually to enable private enforcement (through litigation, of course) in addition to DG COMP's own efforts?

It's very shortsighted on some app developers' part to bet on overreaching interpretations of decisions--be it Judge YGR's "consolation prize" injunction in Epic Games v. Apple or the Dutch ACM's dating-app ruling. What's needed is a structural and principled approach--such as requiring Apple to allow third-party app stores and enabling enforcement through private lawsuits.

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Munich trial canceled as Apple settles with Japan's national patent licensing firm IP Bridge; ITC assigned Apple's case against Ericsson to ALJ Bhattacharyya

This morning's patent licensing and litigation news comes from the world's #1 patent enforcement hotspot, the Landgericht München I (Munich I Regional Court):

The Munich trial in IP Bridge v. Apple that was scheduled to take place today and tomorrow before the Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann) has been vacated as per a joint stipulation by the parties.

The only plausible explanation is that Apple and IP Bridge have settled. Otherwise plaintiffs want to get their day in court.

Previously, Daimler (which was also going to be among the defendants in this week's megatrial) also settled--by means of taking an Avanci pool license (which became known in December).

The two remaining defendants are now Ford (see my report on case no. 7 O 9572/21) and Chinese smartphone maker OPPO (case no. 7 O 8133/21). The patent-in-suit is EP2294737 on "control channel signalling for triggering the independent transmission of a channel quality indicator"). EP'737 was originally obtained by Japanese electronics maker Panasonic, which declared it essential to 4G/LTE and later assigned it to Japan's national patent licensing firm IP Bridge. IP Bridge was set up by Japan to help the country's innovators monetize their intellectual property more effectively, comparable to entities like France Brevets or Korea's ETRI. In order for IP Bridge to have standing, companies like (in this case) Panasonic must assign patents to the non-practicing entity, which can then go out and sue implementers and infringers.

The trial is taking place in a courtroom below Munich's Stadelheim prison. That spacious room is mostly used for criminal trials, but since the outbreak of the pandemic the Munich court has sometimes held patent trials there.

Enforcement in Germany--above all, in Munich and Mannheim--gives patent holders decisive leverage. Just yesterday I reported on the unavailability of most Nokia-branded smartphones (which are made by trademark licensee HMD Global) as a result of the ongoing enforcement of a Mannheim injunction by Fortress-funded VoiceAge EVS. Apple settled with VoiceAge EVS and other Fortress-financed entities last year--and with its past experience, particularly Judge Dr. Zigann's 2018 Qualcomm v. Apple injunction relating to some older iPhone models, Apple apparently didn't want to take its chances.

One of the world's largest cellular SEP holders, Ericsson, is also suing Apple in Germany (as well as the U.S. and a few other jurisdictions, with preliminary injunction requests pending in Brazil and the Netherlands, including a recently discovered case against a Brazilian Apple distributor).

In the U.S., the closest jurisdiction to Germany in terms of leverage from injunctive relief is the United States International Trade Commission ("USITC" or just "ITC"). The ITC's Chief Administrative Law Judge assigned Ericsson's SEP case to ALJ Shaw, and the first of Ericsson's two non-SEP cases to ALJ McNamara. The second Ericsson non-SEP case (third Ericsson case in total) was assigned to ALJ Elliot. An investigation of Apple's countersuit was instituted last week as well, but only today have I been able to access a document according to which the investigation has been assigned to ALJ Monica Bhattacharyya, who became an ALJ only a few months ago but has been with the U.S. trade agency for a long time as a staff attorney with the Office of Unfair Import Investigations (OUII) and previously worked in private IP litigation practice. The OUII participates in some ITC investigations as a third party representing the public interest, which does not mean that the OUII focuses on the parties' public-interest argument concerning the appropriateness of limited exclusion orders (import bans): the OUII's job is to increase the likelihood of correct decisions on the merits. Apple's attempt to get mobile base stations banned does raise public-interest concerns, however.

Interestingly, ALJ Bhattacharyya "studied comparative legal systems as a Bundeskanzler [Federal Chancellor] Scholar at Goethe University in Frankfurt, Germany" (quoting from an ITC press release), so when she hears about patent injunctions handed down by German courts or other litigation events in that jurisdiction, she may be in a privileged position to draw parallels between the world's two most important jurisdictions for patent injunctions.

The likelihood of an Ericsson-Apple settlement will definitely increase around trials and rulings by the ITC and by German courts, as well as when certain courts in Brazil and the Netherlands adjudicate Ericsson's preliminary injunction motions.

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Wednesday, February 23, 2022

Most Nokia-branded phones banned in Germany due to enforcement of patent injunction by Fortress-funded VoiceAge EVS

Nokia itself stopped making phones a while ago, but a company named HMD has a trademark license allowing it to sell Nokia-branded phones (running Android, not Symbian). In August I reported on a patent injunction secured by VoiceAge EVS, an audio codec patent licensing firm funded by Fortress Investment, in Mannheim against HMD. Today I learned that VoiceAge EVS went ahead and enforced the injunction, which requires some security (bond or deposit) during an appeal, and apparently moved for contempt-of-court sanctions against HMD. As a result, HMD had to stop selling most of its phones in Germany.

Heise online, Germany's leading information & communications technology new site, spoke with HMD, which blamed the removal of the vast majority of its products from its German online shop on a defeat in an enforcement proceeding. HMD appealed the decision (which may be an order of contempt sanctions). It sounds like the Mannheim Regional Court sided with VoiceAge EVS over an enforcement-related question, and HMD then appealed that order to the Karlsruhe Higher Regional Court.

EVS (Enhanced Voice Services) is a 3GPP audio codec standard (Wikipedia). Apparently HMD removed support for EVS from the products it most recently launched in Germany (Nokia G21 and G11; the latter is presently sold out). Some resellers such as Amazon and the MediaMarkt consumer electronics retail chain still have some older Nokia products on stock. VoiceAge EVS would have to sue those resellers as the injunction obtained against HMD does not apply to them.

While consumers generally don't know about EVS and the benefits it offers, there's a significant quality degradation (for the quality of voice communications) when phones don't support that standard any longer.

What VoiceAge EVS v. HMD shows is that German patent injunctions can be commercially impactful. Three years ago, Apple was unable to sell some older iPhone models in Germany because of an injunction Qualcomm had won in Munich. Shortly thereafter, the parties settled, but just because Apple needed Qualcomm's 5G chips. At that stage, Apple had resumed its German sales of certain older iPhone models by incorporating Qualcomm 4G chips into them. And last summer Apple settled with Fortress, which also resulted in the voluntary dismissal of all VoiceAge EVS lawsuits against Apple. Otherwise Apple would likely have been enjoined as well.

While we're on the subject of patent enforcement in Germany, there's a huge two-day trial taking place in Munich over the next couple of days in IP Bridge v. Ford (case no. 7 O 9572/21), IP Bridge v. Apple (case nos. 7 O 2395/21 and 7 O 2963/21), and IP Bridge v. OPPO (case no. 7 O 8133/21). All these cases will be decided by the Munich I Regional Court's Seventh Civil Chamber (Presiding Judge: Dr. Matthias Zigann).

The patent-in-suit (EP2294737 on "control channel signalling for triggering the independent transmission of a channel quality indicator") was originally obtained by Japanese electronics maker Panasonic, which declared it essential to 4G/LTE and later assigned it to Japan's national patent licensing firm IP Bridge. The patent was previously asserted against others, and an attempt to invalidate it went all the way up to the Federal Court of Justice, which upheld the patent.

Daimler would have had to defend itself against the same patent this week, but took an Avanci license late last year.

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Samsung's counterclaims against former IP chief Dr. Ahn in Texas allege misappropriations of trade secrets, unjust enrichment

In the IP community it sometimes happens that yesterday's allies are today's adversaries. The legal profession obviously has to respect certain professional rules, but the rule is not that someone who advised or represented a particular client in one case, or even a large number of cases, is forever barred from suing--or defending against--that former client.

There was quite some surprise--if not astonishment--in Korean media when the long-time head of Samsung's IP Center, Dr. Seungho Ahn, appeared to have a hand in a patent infringement action brought by a non-practicing entity named Staton Techiya against Samsung in the Eastern District of Texas. Korean corporations expect an unusual degree of loyalty from their employees, especially from their executives. However, when a company and an individual part ways, they may find themselves at loggerheads further down the road.

It's unclear whether Dr. Ahn's departure from Samsung had anything to do with the Apple-Samsung settlement, which was quite costly for Samsung. I watched that dispute from the first round of complaints in 2011 to the 2018 settlement. Apple had been awarded a sizable damages amount in a couple of U.S. cases, and that's why Samsung ended up having to pay a ton of money--but Dr. Ahn and his team nevertheless accomplished something remarkable because Apple never had serious leverage over Samsung from the enforcement of any patent injunction. Temporarily, the Galaxy Tab wasn't available in Germany, but that decision was corrected later, and the harm to Samsung was limited. Also, the second Apple v. Samsung trial in the Northern District of California could have become very costly, but under Dr. Ahn's leadership Samsung got a decent outcome ("only" a damages award on the order of $100M). Apple had a home-court advantage over Samsung, and there was nothing Dr. Ahn--himself admitted to the California Bar--could have done about it.

Last week, Samsung brought counterclaims against Dr. Ahn and another former in-house lawyer (Sungil Cho), alleging a misappropriation of trade secrets and seeking a full disgorgement of any profits they would make from those patent assertions against Samsung. Various media reported on it. Let me point you to the Korea Economic Daily article on last week's filing.

On February 14, Staton Techiya filed another patent infringement complaint against Samsung in the Eastern District of Texas, asserting four additional patents. Samsung will have to respond to that complaint, and will presumably bring the same counterclaims unless those patents are--as they might be--too young to have been known to Dr. Ahn and his co-defendant while they were working for Samsung.

These are the prayers for relief relating to Samsung's counterclaims:

That Techiya and Synergy aided and abetted Ahn’s and Cho’s breach of fiduciary duty to Samsung;

E. That Techiya, Synergy, Ahn, and Cho misappropriated trade secrets of Samsung under 18 U.S.C. §1836 et seq.;

F. That Ahn and Cho breached their fiduciary duty to Samsung;

H. That Techiya, Synergy, Ahn, and Cho engaged in a civil conspiracy regarding Ahn’s and Cho’s breach of fiduciary duty to Samsung;

I. Awarding to Samsung of compensatory damages from Techiya, Synergy, Ahn, and Cho, in an amount to be determined at trial;

J. Awarding to Samsung of disgorgement of the unjust enrichment of Techiya, Synergy, Ahn, and Cho, in an amount to be determined at trial;

K. Awarding to Samsung punitive damages, in an amount to be determined at trial, including pursuant to 18 U.S.C. §1836 et seq.;

L. Enjoining Techiya, Synergy, Ahn, and Cho from further misappropriation of Samsung’s trade secrets and conduct regarding breach of Ahn’s and Cho’s fiduciary duty; and

M. For any such other and further equitable and/or legal relief as the Court deems just and equitable.

Thosse former Samsung lawyers are innocent until proven guilty (or, more accurately, liable). I guess they will vigorously defend themselves against those counterclaims, though it's also possible that the dispute will be settled soon. Samsung may have raised its counterclaims in accordance with the principle that a good offense--though I'n not taking a position for now on whether it actually is good--is sometimes the best defense.

Dr. Ahn was previously mentioned on this blog when Apple and Nokia were complaining about Quinn Emanuel's alleged disclosure of confidential ("attorneys' eyes only") licensing terms. In the end, QE got a slap on the wrist, and Samsung wasn't sanctioned at all. That's not to say the outcome will be similarly unspectacular this time around, but it could be. QE is not representing Samsung against its former employees.

Finally, here's the court filing with which Samsung brought its counterclaims:

22-02-13 Samsung Answer to ... by Florian Mueller

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Monday, February 21, 2022

Dutch antitrust authority fines Apple for fifth time (aggregate: €25M) over alleged non-compliance with dating-app payment system ruling

Dutch tech reporter Nando Kasteleijn of NOS just reported on Twitter that the Authority for Consumers & Markets--the Dutch antitrust authority--has imposed another contempt sanction on Apple of €5 million ($5.7 million) for this calendar week, on top of €20 million ($22.7 million) imposed over the course of the past four weeks. The competition regulator of the Netherlands claims that Apple's so-called "solutions" still fall short of what the agency believes is needed to enable dating-app makers to make use of alternative payment systems to Apple's own IAP:

As I discussed with Tweaker's Arnoud Wokke on Twitter, these fines are levied in advance. They are meant to have a coercive effect: Apple can still avoid them for a new week by bringing its conduct into compliance.

Those weekly sanctions can reach--but not exceed--a total of €50 million ($56.7 million).

The complaint that led to the underlying decision on the merits (which Apple is still appealing) was brought by Match Group, a U.S. company best known for Tinder. Someone claimed on Twitter that Match Group has zero employees in the Netherlands. There may not be a single Dutch app maker that has a substantial benefit from this case. That doesn't deprive the ACM of jurisdiction as its job is to protect the "C" in its name: Dutch consumers. However, it's easy to see that this case only makes sense as a "pilot project" with the objective of expanding the same reasoning to other app categories and to other jurisdictions, particularly other EU member states, as the ACM says it's decision is based not only in Dutch but also EU competition law.

While I'm a vocal critic of Apple's App Store terms, the Dutch situation is not a simple one of Apple committing violations and acting as if it were above the law. The situation is rather more nuanced, and on the specific question of whether Apple can reasonably require app makers to submit a new app for the Dutch market, I can see technical reasons--apart from obvious commercial motives--for which Apple has made that choice. Apple is simply trying to capitalize on the fact that the Dutch market is small. If Apple required app makers to submit a new app for the entire EU Single Market, some would also complain that it's a hassle, but if it resulted in major savings for developers, it would be worth the effort.

The much bigger issue here is whether Apple can collect a 27% commission on revenues that bypass its IAP system. Considering that certain alternative payment systems have a base transaction fee such as $0.50, 27% is a prohibitive commission compared to the 30% Apple normally demands (and in any event it's higher than the 15% of Apple's small business program, making it a total non-option for dating-app startups). I don't think Apple would realistically be able to impose a 27% commission as a fair, reasonable and non-discriminatory (FRAND) IP license fee. But the question is whether the ACM can do anything about it in the short term. I have my doubts, let's put it that way.

New York University (NYU) professor Scott Galloway calls Apple's cut a "mob-like 30% toll" in a very thought-provoking article on how Apple might hit $1 trillion in revenue by 2030 (from $366 billion last year) leveraging its power and resources. The headline is "Apple: Thief" and I'd like to highlight this tweet by the author on Apple just "stealing markets from incumbents":

There are serious issues. I agree with mobile app business guru Eric Seufert that the impact of Apple's ATT (anti-ad-tracking) policy on Shopify's stock price raises concerns about how small and medium-sized businesses (many of which rely on Shopify) suffer under the Apple tyranny. Also, ATT is a total squeeze that makes user acquisition ("UA") more expensive while diminishing the ad-based revenue generation opportunity.

I still think the Dutch dating-app case has potential-if the same reasoning is applied to other app categories and spills over to other (especially European) markets. But it's all taking time, and in some jurisdictions (including the EU) new legislation may make an impact ahead of definitive and tangible results from any enforcement of the existing laws.

It's a complex situation. I will continue to criticize Apple, but I strive to be a rational (not rabid) critic. For now, I think Apple's conduct following the ACM decision is above board. Sort of hardball, but not out of line--and not entirely without merit.

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Saturday, February 19, 2022

ITC institutes investigation of Apple's allegations that Ericsson's 5G base stations infringe mmWave patents, after deciding to investigate three Ericsson complaints

The patent tit-for-tat between Apple and Ericsson continues. One day after the United States International Trade Commission ("USITC" or just "ITC") instituted three investigations further to Ericsson v. Apple complaints (and Judge Gilstrap set a case schedule for the Apple v. Ericsson FRAND countersuit pending in Texas), the ITC on Friday gave notice (PDF) of the anticipated institution of investigation no. 337-TA-1302 over Certain cellular base station communication equipment, components thereof, and products containing same. In that case, Apple is seeking a U.S. import ban on Ericsson mobile infrastructure products, asserting three mmWave patents that have not been declared essential to any industry standard.

Like in the three Ericsson v. Apple cases (investigations no. 337-TA-1299, -1300, and -1301), the task of building a factual record on public-interest considerations has been delegated to the Administrative Law Judge (ALJ) to whom the case will be assigned (presumably on Monday).

Also yesterday, the ITC's Chief ALJ Clark S. Cheney assigned the investigation of Ericsson's third complaint against Apple to ALJ Cameron R. Elliot. While ALJ Elliot is relatively new to the ITC (he joined less than three years ago), he actually has an impressive intellectual property background, and studied physics before attending law school. His combination of technical and legal skills was apparently recognized by the DOJ, which hired him as a trial attorney on its IP team (Commercial Litigation Branch). Judge Elliot also practiced law at what was (until its orderly dissolution in 2010) "one of the oldest intellectual property boutique firms in the United States" according to IP Watchdog: Darby & Darby.

The next steps for the ITC related to the Ericsson-Apple 5G dispute are now the assignment of Apple's case to an ALJ, and the ALJs will shortly set their procedural schedules, presumably with target dates about 16-18 months off. The respondents will soon have to answer to the complaints. And I consider it likely that Apple will request the consolidation of two or three of the investigations of Ericsson's complaints into a single one, though Ericsson's cases are clearly distinct with respect to the technologies at issue and overlap only with respect to some (but not all) of the accused products.

The ITC is sometimes referred to as a "protectionist agency" (just one example: this Ropes & Gray podcast transcript). But that does not mean U.S. companies are favored. What a complainant does have to meet is a domestic industry requirement. It's all about protecting American jobs--and the iPhone is not made in the United States. It's designed and engineered there, for the most part at least, but not manufactured. A domestic industry can also consist in licensing activities an alternative to manufacturing. However, even in that regard Apple is not an ideal Section 337 complainant: everyone in the industry knows that Apple does not really engage in outbound licensing. Itdoes cross-license, from time to time, in order to bring down its royalty payments on the bottom line. Apple is not known for an mmWave patent licensing program in the United States, let's put it that way.

Apple's ITC complaint seeks to satisfy the technical prong of the domestic industry requirement by claiming with confidential claim charts) that various iPhones (from the iPhone 12 and 13 generations) "practice one or more claims of the Asserted Patents." For the economic prong of the domestic industry requirement, Apple's argument comes down to emplying engineers and other staff in America, plus having an ecosystem. Where Apple claims that it "supports more than 2.7 million jobs across the United States," it points to three types of job creation: direct employment; spending with suppliers (which Apple is known to squeeze really brutally) and manufacturers; and "developer jobs in the thriving iOS app economy." The third part is typical: developers are useful pawns in the chess games Apple plays, but Apple's treatment of iOS app developers is extremely controversial, and actually has been condemned as abusive by Capitol Hill lawmakers (who are working on the Open App Markets Act to right that wrong), the state AGs of 35 U.S. states, and even the Biden DOJ is supporting Epic Games against Apple.

Being an app developer myself, I wish Apple could just follow Microsoft's example, in which case Apple would be in a stronger position to take some credit for the creation of "developer jobs." There's an enormous asymmetry with Apple dictatorially imposing and enforcing its rules and developers being at Apple's mercy. As Horacio Gutierrez, testifying in the United States Senate for Spotify at the time, accurately said, developers have to succeed despite Apple's abusive practices.

When Apple talks about its impact on the U.S. economy, it obviously doesn't mention the enormous damage its ATT policy has done to companies like Meta (Facebook) and Snapchat (look at what happened to those companies' stock prices when the effects of ATT began to show), and countless smaller and lesser-known ones because of the power and money grab that is its prextual privacy campaign. Apple is increasingly isolated and has made itself so many enemies. I'm not denying the great and positive things Apple used to do, and may still do going forward. With respect to its bottom-line impact on the economy at large, Apple is not a blessing, but--with its current practices--closer to a curse.

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Friday, February 18, 2022

Texas court schedules Apple v. Ericsson (FRAND countersuit) trial for July 2023; USITC institutes investigations of three Ericsson v. Apple complaints, delegates public interest

A couple of days ago, it became known that Judge Rodney Gilstrap scheduled an Ericsson v. Apple FRAND trial in the Eastern District of Texas for June 2023. That scheduling order did not make it seem too likely that Ericsson's case would be dismissed for lack of subject-matter jurisdiction despite Apple's motion. Apple's procedural proposal was to firstly hold a case management conference--and Apple also had a more ambitious schedule in mind.

The next day, Apple filed two sur-replies: one in opposition to Ericsson's motion to dismiss Apple's later-filed FRAND case (possibly because Apple interpreted the scheduling order in a similar way as I did and was looking for ways to keep its motion to dismiss alive), and one opposing Ericsson's motion to amend its October 2021 FRAND complaint with additional claims relating to Apple's conduct (the original ones were just about Ericsson's own behavior). The issues raised in those sur-replies are interdependent as Apple's argument against Ericsson's proposed amendment to its original complaint would moot Apple's original motion to dismiss, while Apple's argument against Ericsson's proposed amendment is that you can't amend a complaint over which the court lacked jurisdiction to begin with, but if Ericsson's earlier-filed case stays alive, Apple has to bring its FRAND claims as counterclaims to that one.

I have not yet found a public redacted version of one of the sur-replies, but I have uploaded (to Scribd) Apple's sur-reply in opposition to Ericsson's motion to file a first amended complaint. That sur-reply is an attempt to broaden the range of circumstances under which a court denies an amendment to a complaint.

On Thursday, Judge Gilstrap also entered a routine scheduling order in Apple v. Ericsson (FRAND countersuit) according to which that trial would start on July 10, i.e., shortly after the Ericsson v. Apple trial, which starts in early June, would presumably conclude (this post continues below the document):

22-02-17 Scheduling Order A... by Florian Mueller

Given that Apple's FRAND complaint was filed about 2.5 months after Ericsson's original case, Apple would get a shorter time-to-trial than Ericsson. But it makes sense given the extent to which the issues in those cases overlap. The question is whether there will be a separate Apple v. Ericsson FRAND trial at all, as its FRAND claims may become counterclaims. There are also declaratory-judgment claims targeting three Ericsson 5G patents in Apple's case, and it's possible that those would then be put before a jury in July 2023. Apple is probably relieved that a scheduling order has also come down in its own case (as opposed to the court firstly evaluating whether that case would go forward at all in the proposed form), but the hurdle for Apple to become the plaintiff in a unified Ericsson-Apple FRAND case is still very high.

There is also some procedural progress in Washington, D.C. at the United States International Trade Commission ("USITC" or just "ITC"). As I expected two days ago, the ITC instituted investigations of Ericsson's three ITC complaints (U.S. import ban requests) against Apple, and I do not have the slightest doubt we'll see an investigation of Apple's countercomplaint instituted any moment now, too.

Ericsson's standard-essential patent (SEP) complaint (no. 337-3595) has been assigned investigation number 337-TA-1299 (PDF); non-SEP complaints nos. 337-3596 and 337-3597 have been assigned investigation numbers 337-TA-1300 (PDF) and 337-TA-1301 (PDF).

The SEP case (337-TA-1299) has been assigned to Administrative Law Judge (ALJ) David P. Shaw. I vaguely remember how he joined the ITC as a "newbie" in 2011; by now he has a great deal of experience in patent law. The first of the two non-SEP cases (337-TA-1300) has been assigned to ALJ MaryJoan McNamara, who like ALJ Shaw has a social-security background, and was appointed four years after him. No assignment of the third Ericsson case (second non-SEP case) has happened yet.

In all three of these cases, the Commission (the U.S. trade agency's top-level decision-making body) has elected to delegate the building of a factual record on any statutory public-interest issues to the ALJs (who will then also write a recommendation on the extent to which the public interest weighs against an exclusion order; the actual decisions are still made by the Commission itself). According to official ITC statistics, the Commission delegated the public-interest record-building part to ALJs in about 16% of investigations that started last year. However, it hardly ever changes anything about the outcome. Unless I missed something, it's been several decades since the Commission itself decided against an import ban for public-interest reasons. The factual record developed by the ALJs is, however, also available to the United States Trade Representative (USTR), to whom U.S. presidents typically delegate their Presidential veto power over ITC exclusion orders. Apple had the benefit of a Presidential veto in 2013 when Samsung won an ITC ruling over a SEP.

I venture to guess the Commission will also delegate the public-interest part to the ALJ who will preside over the investigation of Apple's countercomplaint against Ericsson. Most people in the information and communications technology industry would presumably concur with Ericsson that mobile base stations raise far more serious public-interest issues than smartphones with a view to potential substitutability.

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Wednesday, February 16, 2022

Texas judge schedules Ericsson v. Apple trial over 5G standard-essential patent licensing for June 2023, apparently not impressed with Apple's alternative ideas

On Tuesday, Judge Rodney S. Gilstrap--whose more formal title is Chief United States District Judge of the United States District Court for the Eastern District of Texas--handed down a scheduling order in the Ericsson v. Apple 5G FRAND case. There will be a scheduling conference in a month from today, and the trial date is in June 2023. The order doesn't bode well for Apple's efforts to have that particular case thrown out and effectively replaced with another case in which Apple would be the plaintiff. Just a few days ago, Ericsson accused Apple of having wasted court and party resources "by forcing unnecessary litigation on two fronts."

Here's the order, which I'll discuss further below:

22-02-15 Ericsson v. Apple ... by Florian Mueller

Apple wanted an early case management conference, and there will be a scheduling conference on March 16--but there are no signs of the focus being on the parties' dueling motions to dismiss their cases. Instead, Judge Gilstrap appears to be proceeding on the basis of the assumption that Ericsson's earlier-filed case is going to go forward, and the question is just how, not if.

As for calendaring, Apple had proposed a December 2022 trial, which would have forced the court to give absolute priority to this litigation over virtually every other case pending before it, and which is inconsistent with Apple's positions on scheduling whenever it had to defend against patent infringement allegations in the same district. Judge Gilstrap has scheduled the trial for June 2023. That is reasonably soon, but manageable.

In its reaction to Apple's aggressive scheduling proposals, Ericsson focused more on what the parties could and should meaningfully do in the very near term. As I explained in the final part of This recent post, Ericsson suggested an early exchange of the parties' positions on what the FRAND terms for a 5G cross-license should be, and some key evidence in that context. Judge Gilstrap's scheduling order is designed to start the pretrial discovery process shortly, and requires the parties to make some initial disclosures within 30 days of the March 16 scheduling conference.

Theoretically, Judge Gilstrap could enter such a scheduling order only to find a few days, weeks, or months later that he'll actually grant Apple's motion to dismiss Ericsson's earlier-filed case. That seems very unlikely, however. The flurry of motion practice on those two Eastern District Ericsson-Apple dockets has obviously not gone unnoticed. If Apple's motion to dismiss had come across as being very likely to succeed, the logical next step would have been a motion-to-dismiss hearing, which would then have had the potential to eliminate the need for any further scheduling order.

All in all, Apple will probably perceive that scheduling order as if its own alternative ideas had been rebuffed. It also seems that Apple's newfound love of the Eastern District was not credible. Apple may want to think about whether it really benefits from taking extreme (like that proposal to hold a December 2022 FRAND trial in Texas) and inconsistent (concerning its preferred venue) positions. Up to a certain point, a party vigorously defends its rights; but beyond that point, it just comes across as unreasonable. I believe June 2023 is simply the trial date that Judge Gilstrap considered reasonable regardless of what Apple proposed. It's not like Apple had to demand a December 2022 trial because otherwise the court would have set a late 2023 instead of mid 2023 trial date. I guess the court just ignored the December 2022 proposal because no one could take that one seriously in the first place.

I must also say that I'm getting a bit annoyed by Apple repeatedly telling courts and the ITC (such as in its recent public-interest reply) that it would prefer to both parties to drop all their infringement actions worldwide in favor of the Texas FRAND proceedings. There is no way that a FRAND case can resolve a single non-SEP case. At a minimum, Apple should distinguish between SEP and non-SEP infringement actions.

I'm looking forward to following the further proceedings in the Eastern District of Texas. This is a high-profile case that represents a splendid opportunity for the Eastern District to demonstrate its competence in patent-related litigation. The Ericsson-HTC dispute in that district already made FRAND history with a Texas judgment being affirmed in its entirety by the Fifth Circuit. Ericsson v. Apple has all the ingredients of a landmark case, unless the parties settle before anything important happens in court.

These days the United States International Trade Commission (ITC) will presumably institute four investigations involving these two parties (Ericsson brought one SEP complaint and two non-SEP complaints; Apple brought one non-SEP complaint).

While the European Commission is not going to make any Ericsson v. Apple decisions in a strict sense, I am sure some of its experts are following the dispute closely as the EU's executive branch of government is working on what may culminate in new SEP-specific legislation.

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Tuesday, February 15, 2022

TCL facing onslaught from HEVC Advance licensors in Munich: video codec patent enforcement

When it comes to video codecs, Dusseldorf has been the world's leading patent enforcement forum for about a decade. However, Access Advance has lately suffered a major setback there, and it appears that the HEVC Advance pool's answer to the duplicate-royalty problem is still lacking and wanting.

Meanwhile I've done some research on patent infringement actions brought by HEVC Advance licensors against Chinese electronics maker TCL, a frequent defendant to standard-essential patent (SEP) assertions. Those cases were filed with the Munich I Regional Court, where TCL has also been sued by LG Elecronics over a couple of wireless patents, but those cases are stayed until at least the end of next month. The patents-in-suit in those wireless cases (case nos. 7 O 12979/20 and 7 O 12656/20) EP2239905 and EP2086155, both on an "apparatus for transmitting and receiving a signal and method of transmitting and receiving a signal."

A spokeswoman for the Munich court has confirmed the pendency of the following HEVC Advance v. TCL cases:

  • 21st Civil Chamber (Presiding Judge: Dr. Georg Werner); hearing dates in September and November

    • Dolby v. TCL, case no. 21 O 4139/21, EP2777270 on a "procedure for coding and decoding of images, apparatus for coding and decoding and corresponding computer programs"

    • Mitsubishi v. TCL, case no. 21 O 4136/21, EP2720468 on a "moving image decoding method"

    • GE v. TCL, case no. 21 O 4140/21, EP2559245 on "video coding using multi-tree sub-divisions of images"

    • ETRI v. TCL, case no. 21 O 4141/21, EP2723078 on an "image decoding apparatus"

    • IP Bridge v. TCL, case no. 21 O 8819/21, EP3288261 on a "moving picture decoding method"

  • 44th Civil Chamber (Presiding Judge: Dr. Anne-Kristin Fricke)

    • Philips v. TCL, case no. 44 O 6966/21, EP2950544 on "adaptive coding of the prediction error in hybrid video coding" (hearing date TBD)

In a somewhat related context, Juve Patent reported last year that TCL is typically represented in German patent infringement cases by Dr. Andreas Kramer of Vossius & Partner.

It's a safe assumption that TCL won't be the last company to be sued by HEVC Advance licensors in Munich...

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European Commission launches public consultation on standard-essential patents and potential SEP legislation: feedback requested until May 9

The European Commission has updated the web page for its new policy initiative relating to standard-essential patents (SEPs). A few months later than originally planned (which is not unusual), the Commission is now accepting feedback until May 9, 2022.

[Update] The questionnaire can be accessed via this webpage. [/Update]

The web page still keeps all options open with respect to whether there will be a legislative initiative such as an EU directive, a set of mere recommendations, or both. But a five-page PDF document is available for download. That document describes the "likely type of initiative" as a "[l]egislative initiative, combed with non-legislative actions." And the section on the political context indicates an inclination to expand the scope of the "acquis": the fields of law addressed by the EU:

"EU patent law is fairly limited and fragmented. EU patent law therefore needs to be recalibrated to boost the resilience of our patent system and support the EU’s twin transition (digital and green). The imminent launch of the unitary patent system also makes this the perfect time to enhance EU patent law and facilitate access to critical technologies. The Commission will therefore develop a coherent and balanced package comprising three patent-related proposals. These proposals, announced in the IP action plan, will cover supplementary protection certificates, compulsory licensing and standard-essential patents (‘SEPs’)."

Interestingly, compulsory licensing and SEPs are closely related fields of policy-making. As for the unitary patent system, with the Unified Patent Court commencing its operation soon, the UPC judges will not be bound by a mere policy paper, but would have to respect an EU directive. Given the UPC's narrow focus on patent law (as opposed to courts that normally have jurisdiction over all fields of law, including contract and competition law), it's possible that certain SEP-related defense strategies would not even work in the UPC. The Commission doesn't voice that concern in the "Call for Evidence" document, but that doesn't mean the Commission isn't aware of a potential vacuum concerning SEP enforcement and other cases involving a compulsory-licensing defense.

A lot of what the "Call of Evidence" document says is incontrovertible, such as the fact that "[t]he numbe rof declared SEPs continues to increase." I just struggle with one sentence:

"Since infringement claims are typically met with counterclaims that argue the patent is not valid, SEP holders often enforce their patents separately in each territory – a burdensome and costly exercise, especially for start-ups and SMEs."

First, the enforcement of SEPs on a country-by-country basis will be much less of a problem once the UPC is in operation. Second--and this is an even more important point: how many "start-ups and SEMs" do you really find at the standard-setting table?

The Commission invites a wide variety of parties to state their views: "SEP holders, SEP implementers, patent attorneys, legal practitioners, academics, patent-pool administrators, industry associations, start-ups, SMEs, SDOs, consultants, policy makers, and any other stakeholders that have experience with SEPs."

I am not going to participate in that consultation, but I will follow the process with great interest and comment on what others communicate to the Commission.

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Monday, February 14, 2022

Dutch antitrust authority keeps fining Apple for alleged non-compliance with App Store antitrust order, but its stated reasons are less than convincing

So the Dutch antitrust authority--Autority for Consumer & Markets (ACM)--announced today that it has imposed a fourth €5 million weekly fine on Apple for non-compliance with an order to allow dating apps to collect payments in ways that bypass the App Store's in-app purchasing system. However, that announcement falls short of what would convince me that Apple is really out of compliance.

I say so so despite frequently criticizing the App Store monopoly, as evidenced by my commentary on Microsoft's recent announcement on app distribution as well as yesterday's post on the asymmetry of Apple's unfettered power to approve or reject apps, to which I'd like to add a new tweet I spotted today and which makes me angry:

[Update on 02/15/22] This developer was lucky: Apple called him and explained the issue to him, and apparently acknowledged that the rejection should have been explained more specifically--a well-known problem with lots of those rejection notices. [/Update]

I strive to be a rational critic, not least because I'm committed to accurate analysis. In all sorts of contexts from app stores to standard-essential patents to video codecs, there are people who disagree with me, or who dislike me. That's OK as long as even my detractors can't deny that I have a high hit rate with my predictions, and must admit that I properly separate my opinion from the facts.

In a recent post entitled Resist the App Store tyranny, but don't troll Apple, I acknowledged that "for app developers it's a hassle to create a separate 'SKU' (shelf-keeping unit, though these shelves are virtual) for the Dutch market," but also expressed my understanding for Apple's decision to choose that particular implementation strategy.

I have two issues with today's announcement by the ACM:

  1. The only issue with Apple's special rules for the Dutch dating-app market that the ACM elaborates on is that "dating-app providers must develop a new app, and submit that new app to the Apple App Store." What the ACM complains about is that "[d]ating-app providers that opt for an alternative payment system are thus forced to incur additional costs" and that "consumers that currently use the app have to switch to the new app before they are able to use the alternative method of payment. It will cost app providers a lot of time and effort to inform consumers properly about such a change."

    If the alternative payment option saved end users a significant amount of money, I'm quite sure the transition would work (and would be worth developers' while).

  2. The statement furthermore says that "ACM has doubts about several other elements of the revised conditions that Apple has imposed on dating-app providers."

    It strikes me as odd that the ACM does not describe those issues even at a high level. Why aren't they being more transparent? Compared to them, Apple is currently more transparent. Ideally they should both tell us--the general public--what they do. But if one of the two sides was less transparent, it should definitely not be the governmental entity.

    Is the problem here--by any chance--that the ACM realizes its order is going to make no impact as long as Apple can charge dating-app providers a commission on in-app payments using alternative systems as well as out-of-app payments? Are they aware of the limitations of the decision they made? Are they now engaging in a publicity war with Apple because they hope to save fact that way--or hope that Apple will make concessions just to avoid being accused for lawless behavior?

I don't think anyone can blame Apple for standing its ground while it is appealing the underlying decision. What we are seeing here is premature enforcement, and the ACM may lose some of its credibility in the end.

One doesn't have to agree with Apple. Let me point you to a very thoughtful write-up by fellow blogger John Gruber. And here's a humorous take by Eric Seufert (Mobile Dev Memo) on YouTube (this post continues below the video):

It's true that Apple is making dating-app developers an offer with respect to the Dutch market that they won't be interested in. But the ACM needs to be more transparent about what it really wants Apple to do; it needs to be realistic about the limitations of the order; and Apple has the right to exhaust all appeals.

It still seems to me that what Apple is doing there is par for the course. In a nutshell: hardball, not hubris. Apple may actually prevail on appeal, at least in part. Let's be realistic about that.

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Sunday, February 13, 2022

A few tweets perfectly sum up the structural unsustainability of exclusive iOS app review by Apple

In my recent post on Microsoft's answers to the App Store monopoly mess, I called Apple a hermit kingdom and said "a market failure in capitalism actually creates a situation that has a lot in common with a communist dictatorship." Alternatively, one can also liken this structural problem--as I did in a Korea Times op-ed last year--to medieval feudalism. That's not really better from a competition standpoint.

With open app markets and multi-platform app stores, Microsoft proposes a real fix, not just a symptomatic cure or window dressing. While Apple encourages developers to report on their App Store experience, it's hard to trust them until they take real steps to address the real issues. Anything less is make-belief, lip service, or window-dressing.

The question is not whether Apple should be allowed to operate a store. They're not a Walmart because you can't open a competing store across the street, the equivalent of which would be an alternative store on iOS. The alternative is not to reach a billion users--which is not an option. The best solution is to have alternative app stores competing for developers. Another possibility would be to restrict Apple's control over its own store as long as it's the only game in town.

Developers are rightly frustrated. However, it's important to focus on structures, not people. Comments on social media--or even court filings, such as in Coronavirus Reporter v. Apple--that attack Tim Cook are not constructive, such as this recent tweet by Paul Graham. Based on his biography, there's no reason to assume Steve Jobs would have qualms over how Apple is treating developers. Jobs might even have reacted furiously to some of the criticism (including, but not limited to, the #FreeFortnite campaign). If Tim Cook retires in a few years without having done a single meaningful thing that improves Apple's treatment of developers, then one can still blame him. There can be no doubt that he wants the best for Apple and that he is extremely rational, so with all that's going on in terms of legislation, regulation, and litigation, there still is the chance of Apple making all the right choices--right not just in a legal or moral sense, but also best for Apple itself.

Today I really just wanted to draw the attention of my professional audience to a few tweets that I consider highly illustrative of the structural problems with app review.

First, an Apple-Microsoft comparison by @littlesteve:

As for "computer says no," the problem is that Apple has to handle such huge quantities of app submissions every day that they have to automate the process to a high degree, and flexibly assign new requests to whoever is available to respond. That makes the experience impersonal most of the time. Also, it's understandable that even when you do communicate with someone at App Review, they just give you their first name (which may not even be their real one). I wouldn't blame them for any of that if we didn't depend on them like we do.

It's also understandable that Apple says you must submit an actual app to them to get a decision. You can't just describe what you plan to develop and ask them whether they will approve. Here, again, the problem is not that they do it that way: the problem is that if you actually create that app and they reject it, it's one click for them (plus another to reject your appeal) and an enormous loss for you as a developer.

On Friday, David Barnard of @RevenueCat stated "the asymmetry of App Review" extremely well in this tweet:

Dave Wood describes the same problem in different words, and rightly notes that Apple lacks democratic legitimacy for the power it has over developers:

Alex Guichet, a former member of Apple's App Review team who is now working for Tesla, says this was one of the reasons he left, and followed up explaining that senior management--not the app review team itself--is responsible for this situation:

Some of the same people who believe Steve Jobs would treat developers better than Tim Cook--such as the Coronavirus Reporter folks--doubt the quality of the app review team. That, too, is just a distraction from the structural issues that need to be fixed. In 2020 I was in contact with an app review team leader named Bill, and even when we disagreed, it was always a rational and constructive discussion. There may be other app reviewers who are less experienced or sophisticated, but I take Alex Guichet's word for it that he had great colleagues there who understood the problem.

Apple is still adamant about not loosening his death grip on iOS apps unless courts and governments force them to. That is regrettable, but Apple can only delay the inevitable.

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