Epic Games v. Apple App Store antitrust case: written order confirms May 3 trial date, further details of trial format

No surprises here: Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California entered a written order confirming what she already discussed with counsel for Epic Games and Apple on Monday. According to Pretrial Order No. 1, the App Store antitrust bench trial will start on Monday, May 3, 2021 (this post continues below the document):

21-03-02 Epic Games v. Appl... by Florian Mueller

Just like on Monday, it's still unclear how many trial days will be required. Over the next 16 days, the parties will provide different versions of their witness lists to the court. The deadlines for those filings are March 12 (Epic's tentative list), March 16 (Apple's tentative list), March 18 (Epic's supplemental list), and March 19 (either party's consolidated list). There will be another pretrial conference on March 26, and I guess at that one the judge presiding over this landmark case--to me, the most important smartphone litigation ever, eclipsing even Apple v. Samsung and FTC v. Qualcomm--will indicate how many trial days are needed. On Monday, different numbers of weeks were tossed out as hypothetical possibilities. It's hardly going to be shorter than three weeks, I guess.

Trials in that district often have a rhythym that leaves one, two or even three days per week to the court for other matters. That is particularly the case when there are urgent criminal trials that must be held. In this case, however, Judge Gonzalez Rogers expects to be able to hear Epic Games v. Apple every day Monday through Friday.

They'll start early (at 8 AM and finish at 3:15 PM, giving her enough time in the afternoon for orders (related to this case and to others she's presiding over). Considering the time zone from which I'll be following the proceedings, this schedule makes it easy for me to listen to the entirety of the public proceedings.

They will presumably have to "seal the courtroom" on a few occasions, but unlike in a patent licensing dispute, there won't really be too many--if any--private agreements to talk about. This is largely about facts that are public, such as Apple's exceedingly restrictive App Store terms and policies. Third parties like Valve may, howevever, seek protection of some of their sales data.

The order says "[p]ublic access shall be by way of telephone access." The court actually broadcast the audio of Monday's case management conference via its YouTube channel, and my guess is that a YouTube audio stream will be provided again for the actual trial, sure to set a new record for the number of concurrent listeners at least in that district and probably far beyond. As the order notes, "video access is not an option for evidentiary proceedings including trials." In the Ninth Circuit, appellate hearings and sometimes also district court hearings (I remember at least one TRO/PI hearing in the Western District of Washington) are livestreamed with pictures. But in those cases, there are only legal professionals speaking in the courtroom (judge and counsel), not witnesses.

Besides the March 26 pretrial conference, April 7 is also an important milestone. On that day, the parties will file their Proposed Findings of Fact and Conclusions of Law. Those documents will provide an outline of what the parties seek to prove, and how--and, ultimately, what the legal relevance the proven facts should have. The single most important battle here is about market definition, which may create a situation in which Apple would have no chance of successfully defending itself (short of a successful appeal).

In the very short term, the Arizona state legislature is going to vote on an App Store bill introduced by Republican state lawmakers Dr. Regina Cobb and Leo Biasiucci (the majority whip in the Arizona House of Representatives). I wrote about that initiative a few days ago. Apple and Google are fighting against it, but I hope the Grand Canyon State will make technology policy history. I've read that "free market" groups are lobbying on Apple and Google's behalf, but as an app developer I'd like to tell them that those app store regimes are--in their current form--antithetical to the notion of a "free market." Those groups have either failed to understand the problem or they have incentives not to understand.

It's similarly absurd to suggest that the Arizona state legislature would somehow insert itself into the Epic Games v. Apple dispute. Further above I was talking about proposed findings of facts and conclusions of law. None of them would be affected by the Arizona decision in any way. A federal antitrust action in the Northern District of California is not controlled by Arizona state law. "Don't legislate while they litigate" would allow anyone to delay or derail an important piece of legislation by suing someone over the same issue in anticipation of a legislative proposal.

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The Search for Scott (Forstall): Epic Games trying to locate former Apple software chief so he can testify in App Store antitrust case

According to Wikipedia, Scott Forstall "involuntarily" resigned as senior vice president (SVP) of iOS software in the fall of 2012. Since then, he's kept a very low profile. Based on his past responsibilities for iOS, Epic Games would very much like to ask him some questions. Interestingly, Mr. Forstall joined Steve Jobs in the announcement of the launch of the App Store "to explain the mechanics of app development for the iPhone" as Epic writes in a joint case management statement with Apple (this post continues below the document):

21-02-22 Epic Games v. Appl... by Florian Mueller

Mr. Forstall's testimony would be used in a couple of months when the big Epic Games v. Apple App Store antitrust case goes to trial in Oakland (Northern District of California).

According to Epic, Apple initially sounded like they were fine with Mr. Forstall testifying, and that they would take care of the logistics. But, according to Epic, "Apple now states that it never suggested it could compel Mr. Forstall to appear for a deposition," after "promising [for well over a month] it would provide a date for Mr. Forstall’s deposition." At some point, a deposition had been tentatively scheduled (for Febvruary 11), but the week before, "Apple revealed that Mr. Forstall had not responded to Apple's inquiries or confirmed that he will appear for a deposition." And the story goes on like this:

"When Epic requested that Apple provide Mr. Forstall’s last known address and contact information, Apple initially provided a PO box and a Twitter handle. Apple also represented that it was not authorized to share Mr. Forstall’s phone number, but later stated that it did not believe that it was in possession of Mr. Forstall’s current phone number. Epic therefore requested that Apple agree that (i) Mr. Forstall’s deposition may occur after February 15, 2021, and (ii) Epic may supplement its expert reports with information arising from his deposition. Apple agreed that Mr. Forstall’s deposition may occur after February 15, 2021, but imposed an arbitrary deadline of March 10, 2021, and refused to agree that Epic may supplement its expert reports. The Parties have not resolved these issues. Epic is currently attempting to locate Mr. Forstall, and hopes that the Parties may avoid the need for Court intervention on these issues."

In the same court filing, Apple admits that it had originally "indicated that it expected its counsel to represent Mr. Forstall at his deposition." Apple says it's OK with the deposition if it takes place before March 10, but doesn't want Epic to "hold discovery open indefinitely while it seeks to locate, serve, and depose another witness." The discovery cutoff date was last week.

If the parties can't work it out until then, this issue may come up during tomorrow's discovery hearing before Magistrate Judge Thomas Hixson (who is not presiding over the actual case but effectively handling certain matters, particuarly discovery-related ones, for Judge Yvonne Gonzalez Rogers. Judge Hixson has a strong antitrust background, which probably comes in handy with respect to Epic Games v. Apple.

March 10 is approaching fast, so the question is whether Epic can locate Mr. Forstall in time, and compel him to testify, ahead of that deadline given by Apple. Ultimately, it's for the court--not Apple--to decide. The trial is still on track to go forward in May, and Epic appears convinced that the trial date wouldn't be affected by this additional deposition.

Former executives are sometimes very reluctant to testify in cases involving their ex-employer. Two years ago, a former Qualcomm president duct-taped the gate to his home (and ultimately had to testify anyway).

Apple's behavior in this context may actually have served to strengthen Epic's resolve to hear what Mr. Forstall has to say. If it is true that he was forced out in 2012, he might not be 100% loyal to his former employer, more than eight years after having been (if true) fired. I don't think Apple is certain that Mr. Forstall's testimony would hurt its case. But if Apple could rely on him, and didn't have to fear that he might seize this opportunity to cleverly and truthfully (under oath) settle some accounts, why would Apple have played these kinds of games with Epic? This could get very interesting, though it's also possible that--once located and compelled--he'll just be evasive and obstructive.

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UK competition court doesn't doubt the merits of Epic Games' antitrust injunction claims against Apple, Google--just forum non conveniens for Apple's U.S. corporate parent

As MLex's Lewis Crofts mentioned on Twitter, Fortnite and Unreal Engine maker Epic Games

• is cleared to sue multiple Google entities as well as Apple (UK) Limited in the Competition Appeal Tribunal (sitting in England and Wales),

• cannot sue Apple Inc. (the Cupertino-based corporate parent of the entire Apple group) in the UK as a related case is already pending in the Northern District of California, making the UK a forum non conveniens under the circumstances, and

• Epic will reconsider pursuing its case against Apple in the UK after the resolution of the U.S. federal lawsuit, but points to certain holdings by the London-based court that are favorable to its wider cause:

  "We note the CAT’s assessment that Apple & Google’s anticompetitive app store policies are ‘serious issues to be tried’ under UK Competition law, and that it is 'well arguable' that their conduct has ‘an immediate and substantial effect in the UK'"

At this stage, the UK court had to make a purely procedural decision: whether or not Epic's complaints should be served on non-UK-based entities Epic wanted to sue in the UK. The court has no problem with service on UK-based Apple and Google entities, and even some Ireland-based (not UK, but EU) Google entities as far as Epic is seeking injunctions against them. With respect to those Irish entities, what helped Epic is timing: it filed before Brexit took effect.

The ideal outcome for Apple and Google would have been if the court had held that there was no "serious issue to be tried." That would have been comparable to an outright dismissal of a case not well pled. No such deficiency was identified here with respect to the injunctions Epic is seeking--just with respect to mere declarations of breach. The court furthermore evaluated whether Epic had "gateways" (reasons for which to bring cases against non-UK entities in the UK). But what ultimately did result in the dismissal of U.S.-based Apple Inc. from the case is simply that the British court determined the Northern District of California was the forum conveniens, and that, at a minimum, London wasn't a better choice.

The court also held that some of its claims didn't entitle Epic to sue certain non-UK Google entities in the UK, but the remaining claims ("claims for breach of the Chapter I and Chapter II prohibitions under the CA 1998 as regards the alleged 'Restrictive Terms' in the DDA and the removal of Fortnite from the Google Play Store") still give Epic a potential path to victory there. The court determined that "there is no issue to be tried as regards the claims for the two declarations in the Apple and Google actions" (also noting that "it may be unfortunate that declaratory relief is not included as a remedy available in the [Competition Appeal] Tribunal").

In the Unwired Planet patent case, the UK Supreme Court actually took a very permissive approach to forum conveniens, holding that even if a smartphone maker generated only 1% of its worldwide sales in the UK, a UK court might nevertheless set a worldwide royalty rate for a standard-essential patent portfolio, and if the defendant didn't agree to a license deal on those terms, it would face a UK-wide sales ban. Here, however, a UK court exercised restraint in jurisdictional terms.

Even if Epic had received the go-ahead today to sue Apple Inc. in London, a decision in the UK would still have taken longer than the California case, in which the trial is only a few months away. The discovery cutoff date in the U.S. case was one week ago.

Today's UK decision doesn't help Google in any way, nor does it solve Apple's real problem, which is that its App Store monopoly is under pressure in multiple jurisdictions.

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Judge converts Epic Games v. Apple TRO into preliminary injunction, says Epic lost credibility with court, and disagrees with Microsoft on Xbox

A few hours after I wrote that this Friday (October 9) and Monday (October 12) were the days on which the United States District Court for the Northern District of California was particularly likely to rule on Epic Games' motion for a preliminary injunction (PI) against Apple, and consistent with what I had told a major newspaper after Epic's temporary restraining order (TRO; blog post), Judge Yvonne Gonzalez Rogers has effectively converted the TRO into a PI (this post continues below the document):

20-10-09 Order on Epic Game... by Florian Mueller

The outcome is the same as at the TRO stage in terms of Epic not being allowed to bypass Apple's in-app payment rules with Fortnite, Apple not being allowed to terminate the developer account for Unreal Engine that formally belongs to an Epic entity in Switzerland, and the court once again declines to hold that one party or the other is likely to prevail on the merits. My report on the PI hearing already stated in its headline that Epic was struggling to persuade the court of its likelihood to win.

While the TRO was a pre-PI decision, the PI is preliminary to a hypothetical permanent injunction that may or may not come down after the bench trial to be held in Oakland in May 2021. Whoever loses will likely appeal, and then it's another question whether a permanent injunction coming down at that point will or will not continue to be enforced.

Judge Gonzalez Rogers acknowledges arguments made by either party with respect to the merits, but the issues are too complex and important to be pre-decided at this point. In particular, the judge notes the highly factual nature of market definition. Here, there are even two market definition disputes (while most antitrust cases involve just one): the question of whether the iOS app distribution market (better for Epic) or the wider games distribution market (better for Apple) must be looked at, and with respect to Epic's "tying" claim the question of whether in-app payments can be separated from the app distribution market. Judge Gonzalez Rogers is not prepared to decide on market definition, even on a preliminary basis, at this early stage--and she also notes that Epic focuses on harm to competitors so far, while any bottom-line impact on consumers under the rule of reason (where Apple could prevail by showing that what it does is ultimately good for consumers) would also need to be considered. Ultimately, the antitrust laws are meant to benefit consumers.

The PI order gives both parties some guidance as to where they bear the burden of proof and on what aspects of the case they must do more going forward. For instance, Apple will later have to convince the court that what its app distribution terms are designed to achieve cannot be achieved with softer rules. Only Epic, however, is told that "adamant[ly]" taking unreasonable, "baffling" positions has already made it lose some of its credibility with Judge Gonzalez Rogers. Footnote 7 says:

"Epic Games disputes that its use of the hotfix was deceptive where it is common practice in the gaming and software industry. The deceptive conduct does not derive from Epic Games’ use of the hotfix specifically, but from using a hotfix to clandestinely add features in violation of the guidelines and its agreements with Apple, and then failing to disclose such code. Moreover, Epic Games did this despite receiving an unambiguous refusal from Apple only a few weeks prior to the introduction of its hotfix. The record further reflects that while hotfixes are commonly used in the industry, their uses are generally to fix or patch critical bugs or defects—not to enact substantive and significant new features. Epic Games’ adamant refusal to understand this basic distinction is not only baffling, but undermines its credibility with this Court." (emphasis added)

Regardless of the party to be reproached (here, Epic, but in other contexts it would also apply to Apple), I think courts should do this more often and tell parties very clearly when their lawyers persistently engage in framing to the extent that it is an insult to human intelligence. It happens in all sorts of contexts all the time. As a litigation watcher, I find it annoying, and I think it must be even worse for judges.

Microsoft is not formally a party here, though it practically intervened (through sworn declarations) as an Epic supporter. Given all the attention that Microsoft's public statement on app distribution terms (blog post) got this week, it's interesting to see that this judge--at least for now--disagrees with Microsoft's view that video game consoles like the Xbox can still have the kind of business model that Epic and Microsoft believe Apple and Google should not have:

"First, Epic Games avers that the iOS market is distinct from other video game platforms because Sony, Nintendo, and Microsoft do not make much profit, if any, on the sale of the hardware or console—unlike Apple, which allegedly makes significant profits from the sale of each iPhone. This distinction is without legal precedent under section 2 of the Sherman Act. Indeed, Sony, Nintendo and Microsoft all operate similar walled gardens or closed platform models as Apple, whereby the hardware, operating system, digital marketplace, and IAPs are all exclusive to the platform owner. As such, a final decision should be better informed regarding the impact of the walled garden model given the potential for significant and serious ramifications for Sony, Nintendo and Microsoft and their video game platforms."(emphases added)

The Windows and Xbox company tried to distinguish the Xbox from the iPhone making the very same distinction that a judge has now, in diplomatic terms, held to make no sense whatsoever. So far, Microsoft appears to have hoped it could have its cake and eat it: keep imposing similar terms as Apple and Google on XBox game makers while forcing Apple and Google to give Microsoft and others more favorable terms. Microsoft would be well advised to make up its mind on the appropriate Xbox game distribution terms sooner rather than later.

It's worth noting that the order makes reference to the COVID-19 pandemic in a couple of contexts:

• "these continued difficult times that is the COVID-19 pandemic era, where gaming and virtual worlds are both social and safe" (by launching a game very soon, I'm going to make a contribution in this regard, too)

• "the continued ongoing pandemic has demonstrated the imperative for substantial digital and virtual innovation"

Epic can now appeal the denial of the Fortnite-related main part of its motion to the Ninth Circuit, while Apple can appeal the consolation prize Epic got with respect to Unreal Engine.

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Epic Games v. Apple bench trial in Oakland to kick off on May 3, 2021 (closer to Epic's preference than Apple's), possibly via Zoom due to covid

Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California is still working on her decision on Epic Games' motion for a preliminary injunction against Apple. At last week's hearing, she wasn't totally convinced of Epic's claim that it was likely to win this case when all is said and done. And it's practically impossible for Epic to deny that Fortnite's removal from the App Store was of its own making (as Google calls it in a parallel case in San Francisco).

In this context I'd like to point you to an article by North Carolina (Epic's home state) newspaper The News&Observer on many Fortnite players preferring to play the game on other devices than iPhones, and Fortnite no longer being as interesting as it used to be, as other games now offer some of the same features. That article appeared before the preliminary injunction hearing, but I just spotted it today on Twitter.

Meanwhile Judge Gonzalez Rogers has set a firm start date for the trial: Monday, May 3, 2021, starting at 8:30 AM (this post continues below the document):

20-10-06 Epic Games v. Appl... by Florian Mueller

This will be a bench trial, i.e., before Judge Gonzalez Rogers and without a jury. Epic's complaint didn't request a jury trial and sought only non-monetary relief, so Apple couldn't have requested a jury trial, but what Apple did was to bring counterclaims involving damages and request a jury trial over that one. As a result, the federal judge would have had to hold two trials, so she urged the parties to agree on one trial format, for which her clear preference would have been a jury trial. Surprisingly, Apple withdrew its demand for a jury trial as part of a procedural agreement with Epic to hold a bench trial on both parties' claims.

This gave the court greater scheduling flexibility, as the SARS-CoV-2 crisis complicates jury trials. This might be a videoconference as the order says "[t]he Court will determine closer to the trial date whether the bench trial will be conducted in person or virtually or some combination thereof." The "combination" would probably mean that many witnesses would testify via Zoom, while counsel for the parties would be present in an Oakland courtroom.

Epic will get its day in court against Apple much closer to its own preferred trial date, which would have been March 29 or April 25, than to Apple's suggestion (August 2)--and even three weeks earlier than Epic's "compromise 8-month-to-trial schedule" would have envisioned. But at the time Apple's position was still that its counterclaims should be put before a jury. A lot has been in flux lately.

A jury trial will be necessary in the related Pepper (consumer claims) and Cameron (app developer claims) class action cases. Apparently the court will hold those jury trials in the summer of 2021, but this very much depend on the impact of covid and when it will be possible for juries to safely meet in a room to deliberate.

The court is really trying to be a rocket docket, with a discovery cutoff date except for the parties' appointed economic and technical experts set for February 15, 2021.

A case management conference had previously been scheduled for October 19, 2020. Also, Epic has recently brought a motion for judgment on the pleadings (similar to summary judgment) on some of Apple's counterclaims, for which Epic would like a hearing to be held next month.

Finally, I'd like to mention that a Congressional report, Investigation of Competition in Digital Markets, was released yesterday and among various other subjects also discusses "mobile app stores." Just a couple of quotes:

• "There are no competitive constraints on the power Apple and Google have over the software distribution marketplace on their mobile ecosystems."

• "Because of the control that Apple and Google exert over software distribution on their mobile ecosystems and the unlikelihood of entry by a new competitive mobile operating system, it is unlikely that a new, competitive app store will be able to successfully challenge the existing, dominant app store operators."

Apple disagrees in a statement it provided to the media.

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Epic Games struggling to persuade court of likelihood of winning its case against Apple: preliminary injunction over Fortnite not too likely

The Epic Games v. Apple preliminary injunction hearing took place this morning (Pacific Time) before Judge Yvonne Gonzalez Rogers in the Northern District of California. The first and longest part--during which the court discussed with counsel for both parties the likelihood of success on the merits--was particularly key. In fact, Cravath's Katherine Forrest, one of two attorneys who argued for Epic, acknowledged that an injunction would not issue in this case unless the court agrees with Epic on its likelihood of prevailing on the merits.

Judge Gonzalez Rogers, who asked counsel for both parties tough questions, appeared at least hesitant--if not very reluctant--to conclude at this early stage of proceeding that Epic was on the road to victory. That doesn't mean she thinks Epic is likely to lose. It's just that under the current circumstances the court would have to reach a conclusion based on a limited amount of briefing. What's in the record now is almost nothing compared to what will be available at trial time (i.e., in July 2021).

Toward the end of the hearing, Judge Gonzalez Rogers strongly recommended putting the factual questions here (and she categorized market definition as a question of fact as well) before a jury, given that appeals courts--in her observation--don't afford district court judges much deference for their factual determinations. She mentioned that sometimes district judges write hundreds and hundreds of pages, but the appeals court just does what it wants. That may have been an allusion to what happened in FTC v. Qualcomm, where a three-judge panel overruled the district court on everything, though there is a possibility of a rehearing en banc leading to a more nuanced ruling. But that's another case. For Epic Games v. Apple, it means the judge would really prefer not to have to decide any factual dispute if it can possibly be avoided--which isn't great news for Epic.

At the PI stage, Epic focuses on a monopoly abuse argument and a tying theory. Judge Gonzalez Rogers started the "tying" part (with Epic arguing that the App Store and in-app payments are separate products and Apple allegedly "ties" IAP to the App Store) by saying she was "not particularly persuaded" with that one--and she also sounded unconvinced of monopoly abuse. Obviously, one cannot know for sure what she will decide after giving this more thought, but if what she said today is any indication, Epic is unlikely to obtain a preliminary injunction with respect to Fortnite, with the realistic best case for Epic being that the court would convert last month's temporary restraining order (TRO) over Unreal Engine (but not the Fortnite game) into a preliminary injunction.

Just like I wrote after reading Epic's reply brief, it's now most likely that the court won't obligate Apple to tolerate an undisputed breach of Apple's App Store terms by Epic and that Epic will keep the iOS version of Fortnite out of the App Store for a few more months and appeal this to the Ninth Circuit. If the appeals court affirms a hypothetical denial of a PI over Fortnite, I don't think it will take long before Epic puts the iOS version of Fortnite back.

The likelihood of success on the merits is just one of the four PI factors, but as Judge Gonzalez Rogers noted, there wasn't "all that much new [in the PI briefing] with respect to the remaining elements." The judge noted that there was "a calculated decision here" and "self-help" in terms of Epic having known full well that Apple would remove Fortnite from the App Store after a "hotfix" that activated a payment system in contravention of the App Store terms.

The possibility of an escrow account (where, for instance, Epic could put the 30% cut it contractually owes Apple) was discussed. It's hard to see that this would solve any particular problem for either party.

The judge is aware of the fact that some other companies besides Epic also complain about Apple's App Store terms. Interestingly, Judge Gonzalez Rogers was wondering whether Epic was the best plaintiff to bring this challenge, given that iOS is just one of several platforms for games, while there may be other types of apps that are more dependent on access to Apple's customer base. What must have made that remark particularly discouraging for Epic is that it suggests the court isn't--at least for now--inclined to agree with Epic on market definition (treating the iOS app distribution market as the relevant market for antitrust purposes, as opposed to a wider games distribution market).

A written order will come down soon, but probably not as fast as last time, when it just took a few hours. The least likely outcome is that Fortnite will be "free" to bypass Apple's in-app payment system, but one thing Epic cannot complain about is the amount of time the court gave its lawyers today.

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Epic Games denies Apple's claim of Fortnite losing popularity, says usage "actually increased by more than 39%" during chosen period: court filing

If you're more interested in what Epic Games CEO Tim Sweeney said in a sworn declaration about the popularity of Fortnite, please click here to skip the part that addresses the legally more relevant questions surrounding Epic's push for a preliminary injunction against Apple.

Shortly before midnight Pacific Time on Friday, Epic Games filed its reply brief in support of its motion for a preliminary injunction (PI) against Apple over Fortnite and other Epic games as well as Epic's Unreal Engine (this post continues below the document):

20-09-18 Epic Reply ISO Mot... by Florian Mueller

Short of a hypothetical sur-reply (for which Apple would firstly have to seek permission from the court), this concludes the PI briefing process, giving the court a week and a half to form an opinion ahead of the September 28 PI hearing. This blog published and commented on the previous filings:

• Fortnite usage on iOS has declined by over 60% since removal from App Store, Epic Games says in motion for preliminary injunction against Apple

• Apple accuses Epic Games of "coercing platforms for its own gain, under the guise of being 'pro-gamer'": PlayStation/Xbox example

• Apple suspects Epic Games seeks "to reinvigorate [waning] interest in Fortnite" and notes Unity is far more popular than Unreal Engine

• Apple attempts to debunk tale of two Epic companies in order to avoid preliminary injunction concerning Unreal Engine

Epic is seeking a PI over the same two questions--whether Apple rightfully removed Fortnite from the App Store after Epic introduced an alternative payment system, and whether Apple may now terminate all of Epic's developer accounts including the one used for the further development and maintenance of Unreal Engine--that it raised in its motion for a temporary restraining order (TRO). TROs are preliminary to PIs: they're in force for a short period, after which a PI is needed as a replacement or the defendant isn't enjoined until the final judgment. The court granted Epic a TRO over Unreal Engine, expressing concern over what the court at that stage thought might have been retaliatory overreach by Apple, but not over Fortnite, with respect to which Apple prevailed on its argument that Epic was complaining of "self-inflicted harm."

It's interesting to observe the priorities Epic's lawyers set in their reply briefs. The one that reinforced the TRO request practically gave up on Fortnite by prioritizing Unreal Engine. Apparently Epic realized that the "self-inflicted harm" argument was pretty much insurmountable. After all, Epic could have simply continued to comply with Apple's App Store terms while nonetheless challenging them vigorously in court. But this time around, Epic's reply brief lumps the Fortnite and Unreal Engine issues together.

As a seasoned smartphone litigation watcher, I can't help but conclude that just like Apple's "self-inflicted harm" argument was too powerful last time (which led Epic to focus on Unreal Engine instead), Apple has apparently succeeded in making its case that

• the existence of two Epics, one in the U.S. and one in Switzerland, is irrelevant to the question of contract termination because the decisions and the payments are made by the very same people, and

• that Apple routinely and consistently does terminate accounts under such circumstances ("Apple has terminated over 75,000 unique accounts for introducing new features without going through App Review; over 2,000 accounts for introducing a non-IAP payment method; and over 60,000 accounts for introducing hidden features or obfuscating code {...]."

  The latter is very important because Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California said in her TRO order that Apple's reliance on its 'historical practice' of removing all 'affiliated' developer accounts in similar situations or on broad language in the operative contract at issue here can be better evaluated with full briefing."

  In the reply brief, Epic is not even arguing anymore that the Unreal Engine business is run by a separate company. Instead, the emphasis is placed on antitrust theories.

Epic is now going for broke.

Epic's lawyers--who are among the very best antitrust attorneys in the United States--have embarked on what is a "Mission Impossible" with respect to the district court by making the fate of the entire motion (its Fortnite and Unreal Engine parts) dependent on whether the court will conclude at this early stage of proceeding that Apple's App Store Terms, with respect to in-app payments, are illegal and unenforceable. Judge Gonzalez Rogers had made it clear in the late-August TRO hearing that she didn't consider this case to be a "slam dunk" for either Epic or Apple, and said that the case wasn't going to be won or lost at this stage. Epic's legal strategy, however, is to persuade her to say now, with hardly a record (apart from a few declarations and their attachments) having been built, that Epic is likely to prevail on the merits of the case.

Seriously, Epic must be desperate, trying a Hail Mary to overcome the combination of Apple's self-inflicted-harm, practically-just-one-Epic, and consistency-in-account-termination arguments. Obviously, Judge Gonzalez Rogers could say that Epic is going to win this handily. But she's very unlikely to do so, given that she told the parties this was a complex case. I didn't interpret her TRO order as encouraging Epic to sell her on the merits of the complaint--instead, the TRO order showed Apple a way to get rid of what was Epic's consolation prize: the Unreal Engine-related part of the decision, where even Epic can't argue anymore that its Swiss legal entity is not an independent business by any standard.

Even though Epic lumps the two issues together, the court could still find that the account used for Unreal Engine warrants different treatment from the one used for Fortnite. But that wouldn't be easy to do, given what Judge Gonzalez Rogers wrote in her TRO order. So Epic is now facing a significant risk of its motion being denied in its entirety.

Epic can appeal any partial or complete denial to the United States Court of Appeals for the Ninth Circuit. Contrary to what I wrote in August, when I expected Epic to comply with Apple's terms again after a denial of a PI, it now looks like Epic is going to continue for a few more months to decline to walk through the door Apple opened. Instead of putting back a complaint version of the iOS version of Fortnite (one that doesn't bypass Apple's in-app payment system), Epic now appears more likely prepared to take this matter to the Ninth Circuit, and won't moot the issue by complying until the West Coast appeals court has spoken. Epic may hope that whatever Ninth Circuit panel would hear the motion would actually side with Epic on antitrust questions that are extremely hard to resolve on the fast track.

Fortnite still gaining popularity: Epic Games CEO Tim Sweeney

In its opposition brief (filed a few days back), Apple voiced the suspicion that Epic's very publicity-oriented approach to this litigation was driven by a marketing communications desire to reignite interest in Fortnite. That is one of various factual questions--which also include the accusation of Epic having bullied Sony into modifying its PlayStation terms--Epic CEO Tim Sweeney seeks to counter in his second declaration in this briefing process (this post continues below the document):

20-09-18 Tim Sweeney Declar... by Florian Mueller

Before I talk about some of what Mr. Sweeney said in this declaration, I'd like to mention something that is surprisingly missing: an update to his earlier declaration (in support of the PI motion). On the same day, September 18, Mr. Sweeney retweeted a tweet to which one of Epic's own tweets is attached, and which complains about Apple preventing Epic from distributing Mac games (this post continues below the tweet):

Interesting to note that since notarization is effectively mandatory at mainstream scale, Apple deciding to kick you off the developer program means that you can’t distribute even OUTSIDE of the App Store on the Mac. https://t.co/uweYMPcYZJ

— Steve Streza 😷 (@SteveStreza) September 18, 2020

In Mr. Sweeney's earlier declaration, the claim was made--and it's still mentioned in Epic's reply brief--that Windows and the Mac are examples of platforms where anybody can publish anything. Apparently, Mr. Sweeney's tweets and his corporate website ("Apple ending Fortnite Save The World updates for Mac") are more up-to-date than his company's court filings.

In connection with Fortnite's popularity, Mr. Sweeney's declaration--after noting that Google Trends is just about search, not game usage--says "Apple cherry-picked an unusual single-week peak in October 2019 with the average number of searches in July 2020," and explains that the October 2019 peak was due to a special event called "The End" (where the world of Fortnite was sallowed by a black hole).

Mr. Sweeney says "the number of daily active users on Fortnite actually increased by more than 39%" during that same period (October 2019-July 2020).

While Mr. Sweeney has a point here about some selectivity by Apple, I don't think his declaration paints a complete picture either:

• He does not dispute another source than Google Trends that Apple cited: the Bloomberg article "Fortnite's Slowdown Has Epic Games Battling to Spark New Growth" (which relies on different data than Google Trends).

• Mr. Sweeney's declaration misses the most important part of the Google Trends chart Apple referenced (this post continues below the chart), which is that Fortnite once overtook Minecraft and Pokemon, but then fell behind them again toward the end of the period selected by Apple:

• If you move your mouse pointer to any particular location on the above chart, you get a popup that displays some numbers, of which 100 is the absolute peak that Fortnite had. You can see that the week of January 21-27, 2018 was the first one when Fortnite leapt ahead of Minecraft and Pokemon for the fist time, and stayed at the top of the chart until the week of May 26-June 1, 2019, when Pokemon reclaimed the top spot. By the end of the entire period (week of July 26-August 1, 2020, which was not an arbitrary choice by Apple considering the timeline of this dispute), Pokemon left Fortnite behind by more than a third, and Minecraft did so by more than 40%.

• Mr. Sweeney's declaration shows an alternative chart just for Fortnite, and limited to the period from August 4, 2019 to August 1, 2020. But that's similarly selective as Apple's focus on the October-2019-to-August-2020 decline: the full chart (which you can see further above) shows that Fortnite had multiple peaks at 86% of the level of the October 2019 peak, such as for the week of March 11-17, 2018, and September 23-29, 2018. In fact, the red line for Fortnite oscillates around the 75 level for most of 2018.

Therefore, the 39% increase is clearly also the result of selectivity on Epic's part. They're not claiming there wasn't any decline during the entire period Apple's chart covered, which was from Fortnite's launch until this dispute broke out (July 2017-July 2020). Fortnite is clearly not at the all-time peak of its popularity as we speak.

That said, Mr. Sweeney's declaration is an interesting contribution to the public debate, though it changes nothing about the fact that Epic is now undertaking the long shot of preliminarily winning a huge antitrust case on the fast track.

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Apple attempts to debunk tale of two Epic companies in order to avoid preliminary injunction concerning Unreal Engine

This is already my third post on Apple's opposition to Epic Games' motion for a preliminary injunction. In the previous ones I discussed certain factual representations and commented on some of the rhetoric:

• Apple accuses Epic Games of "coercing platforms for its own gain, under the guise of being 'pro-gamer'": PlayStation/Xbox example (in that one you can find Apple's opposition brief)

• Apple suspects Epic Games seeks "to reinvigorate [waning] interest in Fortnite" and notes Unity is far more popular than Unreal Engine

As I explained before, it's hard to imagine that the court would not continue to consider Fortnite's removal from the App Store to be self-inflicted harm. Apple reinforces that point nevertheless, describing Epic as "a saboteur, not a martyr," and noting that "Epic started a fire, and poured gasoline on it, and now asks this Court for emergency assistance in putting it out, even though Epic can do so itself in an instant by simply adhering to the contractual terms that have profitably governed its relationship with Apple for years." But the interesting question in the September 28 hearing is not going to be Fortnite--it's Unreal Engine. Apple wouldn't ban the engine and all apps that incorporate it, but Epic would lose access to the developer tools, which sooner or later would hurt its customers (according to Apple's filing, Epic holds Fortnite gamers as well as Unreal Engine licensees hostage).

What applies to both Fortnite and Unreal Engine is that Epic could just continue to do business with Apple, and on iOS, the way it used to do, by complying with the App Store terms while still being able to challenge them in court. The question for the court to decide is whether the fact that Epic holds the key to the kingdom in its hands applies only to Fortnite--the corpus delicti in a contractual sense--or also to Unreal Engine. The reason Epic obtained a temporary restraining order (TRO) was just that the judge was concerned about what might be overreaching retaliation: the termination of a developer account held and used by a separate legal entity for the purpose of developing Unreal Engine.

When the court granted the TRO, the court also made it clear what Apple would have to improve on at the next stage (the decision on whether or not to convert the TRO into a preliminary injunction). For example, the TRO order stated that "Apple's reliance on its 'historical practice' of removing all 'affiliated' developer accounts in similar situations or on broad language in the operative contract at issue here can be better evaluated with full briefing." In this context, "full briefing" referred to the preliminary injunction stage.

The numbers that Apple's opposition brief provides speak a clear language:

"Apple has taken this approach thousands of times with other developers and their affiliates."

[...]

"Apple has terminated over 75,000 unique accounts for introducing new features without going through App Review; over 2,000 accounts for introducing a non-IAP payment method; and over 60,000 accounts for introducing hidden features or obfuscating code (for example, by installing executable code)."

[...]

"Apple does not wait to be fooled a second time before terminating an affiliate for the bad deeds of its principals."

So it's not just that the language of Apple's contracts allow such termination; it's routinely done. As to whether it's necessary, Apple explains that this is needed to protect customers (as well as other developers, who would otherwise end up paying for the likes of Epic). In this context, Apple stresses security and provides a detailed declaration by Mark Graff, the former head of Lawrence Livermore National Laboratory (where the nuclear secrets of the United States must be protected) and former Chief Information Security Officer of the NASDAQ stock exchange (this post continues below the document):

20-09-15 Mark Graff Declara... by Florian Mueller

Apple particularly relies on Mr. Graff's declaration when explaining to the court that what Epic calls a "hotfix" was just as bad as any other "cheating": what matters is that Fortnite came with code that Apple's App Store team didn't get to review. What ultimately triggered the execution of that code is pretty much irrelevant according to Mr. Graff. In this case, Epic's servers told the app to do so. But the code was there at any rate.

Those of you with a particular interest in cybersecurity will find many interesting statements in Mr. Graff's declaration, such as his views on what a huge task it is for Apple to keep the App Store secure.

Even if the court believed that Apple consistently terminates all accounts held by an entity when a comparable breach occurs and agreed that there were legitimate reasons (such as in the interest of cybersecurity), Epic would still hope to prevail with respect to Unreal Engine just on the basis that a Swiss Epic subsidiary is the related account holder.

Some of what Apple's opposition brief says about the question of whether there really are two separate Epic entities involved was already stated in the TRO hearing. It's interesting nevertheless, especially since I believe Apple would appeal a PI over Unreal Engine to the Ninth Circuit. Such a potential appeal would be likely anyway, but is even more probable when one of the nation's top appellate attorneys, Orrick Herrington Sutcliffe's Joshua Rosenkranz, joined Apple's legal team. His appearance was filed a few days ago, and he's listed on thein the header section of Apple's latest set of filings, in addition to the Gibson Dunn team led by Theodore "Ted" Boutrous. Whether Epic would appeal is another question, given that they would probably give up with respect to Fortnite and then bring it back to the App Store in a compliant form--in which case the Unreal Engine issue would be moot.

Judge Gonzalez Rogers in the next step, and possibly the Ninth Circuit thereafter, will find various facts in the record that suggest there really aren't two Epics except in a purely formal sense:

"Epic administers the two accounts 'as if they are one.' [...] 'The accounts share a single tax ID number, a single individual as the registered account holder, and a single credit [card] number that is used to pay the annual program fee.' [...] 'The two accounts share the same test devices, and their [agreements] were renewed within a minute of each other on June 30, 2020.'"

Apple argues that "Unreal Engine posed a potential threat" because it could serve as "a second potential 'trojan horse' that would enable Epic to carry through on its threats to undermine the App Store and insert further unauthorized features."

Going back to the question of whether the two Epics must be treated as one, Apple provides some additional information that makes Epic's representation of the Unreal Engine business being all that separate ever less credible. A sworn declaration by Apple Fellow Phil Schiller mentions "[p]ublic reporting by Reuters" according to which "circumvented payments from U.S. users go to Epic Games, Inc., and those from users outside the U.S. go to Epic SARL [the Swiss entity whose account the court didn't let Apple terminate, for now, because of Unreal Engine]."

Unless Epic and/or its own lawyers got confused, it appears that Unreal Engine actually uses the same developer account as Fortnite with respect to the Sign in With Apple ("SIWA") feature. One of Apple's lawyers signed a declaration to which he attached a letter he had sent to Epic's counsel on September 10 (this post continues below the document):

20-09-15 Jay Srinivasan Dec... by Florian Mueller

In that letter, Gibson Dunn's Richard Doren explains that Apple, without any obligation under the current court order, gave Epic more time before terminating the SIWA feature. Without SIWA, Fortnite users who installed the game on their phones before it was removed from the App Store (and haven't deleted it since) wouldn't be able to sign in to the game with their Apple accounts. But in this context, counsel for Epic allegedly said that a termination of the SIWA authentication feature for the main Epic account would also affect users of the Unreal Engine. This is how Apple's lawyer comments on an apparent contradiction in Epic's representations:

"It should also be noted that we are surprised and puzzled by your assertion that terminating SIWA for the Epic Games, Inc. account will affect users of the Unreal Engine. Your client has repeatedly and consistently represented to the Court that the Unreal Engine is run by 'a different company. It’s in Switzerland. It’s a totally different set of circumstances.' (Aug. 19, 2020 Hearing [...]) Your client's briefs have assured the Court that the game production business of Epic Games, Inc. is distinct from 'the separate Unreal Engine business' [...], and that 'the developer tools' that are 'necessary to support . . . Unreal Engine . . . are covered by separate integrated agreements.' [...] (emphasis in original).) It is indeed true that the Developer Program account of Epic Games International, S.à.r.l. gives it the ability to use SIWA. If Epic has set up its Unreal Engine business to use this functionality through the Epic Games, Inc. account, that is Epic's own doing. Further, it would again reflect the spuriousness of your client's claim that Unreal Engine is a separate business from Epic Games, Inc. and an innocent, collateral victim of the crisis that Epic Games, Inc. has created."

Epic has until Friday to reply. Apple's opposition brief and the attached factual declarations (including two that are basically short versions of economic expert reports) suggest that the September 28 hearing will be extremely interesting with respect to Unreal Engine.

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Apple suspects Epic Games seeks "to reinvigorate [waning] interest in Fortnite" and notes Unity is far more popular than Unreal Engine

This is a follow-up to my post on Apple's opposition to Epic Games' motion for a preliminary injunction. Like the previous one, this is about Apple highlighting facts that don't make Epic look good. And Apple appears to have stepped up its rhetoric after weeks of Epic running an aggressive #FreeFortnite campaign and Epic CEO Tim Sweeney's Twitter presence increasingly looking like an "I hate Apple's App Store terms" type of campaign account. Interestingly, even though Epic is suing Google as well (for an update on that case, San Jose-based Judge Beth Freeman has declined Google's invitation to take over the Google Play Store antitrust cases), Mr. Sweeney almost exclusively lashes out at Apple in his tweets, and actually promotes Android over iOS at times. On Twitter I read that Epic is "giving away Android devices in #FreeFortnite tournament."

There will be opportunities in the build-up to, and after, the September 28 preliminary injunction hearing to talk a bit more about the parties' legal theories. However, Judge Yvonne Gonzalez Rogers said in the recent TRO (temporary restraining order) hearing that the case would not be decided at this early stage. For now, it's about Epic seeking relief before the court has had the chance to fully analyze the merits. At this point it's just about what the parties are allowed to do while the litigation is ongoing. Epic wants to be allowed to circumvent Apple's in-app payment system, and Apple argues (as I'll discuss later) that Epic's "cheating" (by not disclosing at the time of app review the existence of an alternative payment system) justifies a termination of all of Epic's developer accounts, including the one used for Epic's work on Unreal Engine.

As I reported before, Apple's opposition brief accuses Epic of bullying platform operators: "Epic's strategy of coercing platforms for its own gain, under the guise of being 'pro-gamer,' is something Epic continues to do." At the same time, Apple attributes Epic's behavior at least potentially to Fortnite's waning popularity:

"For reasons having nothing to do with Epic's claims against Apple, Fortnite's popularity is on the wane. By July 2020, interest in Fortnite had decreased by nearly 70% as compared to October 2019. This lawsuit (and the front-page headlines it has generated) appears to be part of a marketing campaign designed to reinvigorate interest in Fortnite."

That passage points to an August 2019 Bloomberg article ("Fortnite's Slowdown Has Epic Games Battling to Spark New Growth"), according to which "[r]evenue has been sliding for the battle-royale juggernaut," and a Google Trends analysis of how popular three game-related search terms were bbetween mid-July 2017 and late July 2020, shortly before Epic's litigation against Apple started. The Google Trends chart shows that Fortnite surpassed Minecraft and Pokemon a few months after its launch, and stayed on top until about the middle of last year, but as of this summer both Minecraft and Pokemon are more popular search terms on Google:

You can find Apple's brief in my previous post, and the links are in footnotes 11 and 12. There is a clerical error in the abbreviated URL ("tinyurl") contained in footnote 12. When I clicked on that one, I immediately saw that something had gone wrong because the yellowish curve for Pokemon was just on the base line of the chart. That's because the search term was "Pokemon." (right, with a period). I manually deleted that one from the URL text field of my browser and got the correct chart (which you can see above). Then the whole thing made more sense.

The following quote from Apple's filing also suggests that Epic is seeking to commercially benefit from its #FreeFortnite campaign:

"Finally, a word about Epic’s claimed reputational harm. Epic has engaged in a full-scale, pre-planned media blitz surrounding its decision to breach its agreement with Apple, creating ad campaigns around the effort that continue to this day. If Epic were truly concerned that it would suffer reputational injury from this dispute, it would not be engaging in these elaborate efforts to publicize it. From all appearances (including the #freefortnite campaign), Epic thinks its conduct here will engender goodwill, boost its reputation, and drive users to Fortnite, not the opposite. That is not harm."

Apple's filing furthermore explains that Unreal Engine is not the market leader--Unity is. While Unreal Engine is, according to Apple, "used by a minuscule fraction of iPhone apps," Unity (which my app development company uses as well) "characterizes itself as 'the world's leading platform for creating and operating interactive, real-time 3D content,' and is available for 'more than 20 platforms, including Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, and the leading augmented and virtual reality platforms, among others.'" Apple goes on to say that "Unity is used by the overwhelming majority of Apple developers that use a graphics engine."

As I already wrote earlier today, the #1 question in the preliminary injunction context is not going to be Fortnite (I can't see how Epic could dissuade the court from its assessment that Fortnite's removal from the App Store is simply self-inflicted harm) but whether Apple will or (as per the TRO) will not be allowed to terminate all of Epic's developer accounts, including the one Epic uses for its work on Unreal Engine. Microsoft has already twice (1, 2) supported Epic in this litigation through declarations that stress the importance of Unreal Engine to other companies, such as Microsoft. But that doesn't change the fact that Unity is the undisputed market leader. It does, however, look a bit like Mr. Sweeney, in the tweet I already linked to further above, reciprocated the favor by celebrating the launch of Microsoft xCloud...

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Apple accuses Epic Games of "coercing platforms for its own gain, under the guise of being 'pro-gamer'": PlayStation/Xbox example

If you're already familiar with the procedural history of this matter (scope of temporary restraining order etc.) and the concept of converting a TRO into a PI, you can just click here to skip the recap.

On Friday, September 4, Epic Games brought its motion for a preliminary injunction against Apple, once again asking Oakland-based Judge Yvonne Gonzalez Rogers of the United States District for the Northern District of California to obligate Apple

• to tolerate on its App Store an iOS version of the Fortnite action shooter game that would bypass Apple's in-app payment system (in this regard, a motion for a temporary restraining order (TRO) was denied), and

• to refrain from terminating Epic's other developer accounts, particularly the one that ensures Epic's access to Apple's development tools for the purpose of maintaining and improving the Unreal Engine (that part of the TRO motion succeeded because Judge Gonzalez Rogers was concerned about overreach and the potential impact).

TROs are in effect for only a fortnight (whichever way one may spell it) unless the enjoined party consents to an extension. After that period, a preliminary injunction (PI) can and often does replace it, which is commonly referred to as "converting a TRO into a PI." What makes a PI preliminary is that it's in effect until a final judgment grants or denies a permament injunction; a TRO is even more preliminary than a PI. In this case, the court discussed a PI briefing schedule with the parties, which will culminate in a PI hearing on Monday, September 28--ten days after a deadline for Epic's second filing in that context, its reply brief in support of its motion. Until the court's decision on the PI motion, Apple must comply with the TRO.

Typically, a TRO gets converted into a PI, but there are cases in which judges change mind on the basis of more elaborate briefing and in-depth analysis. With respect to the merit of the underlying case, there's not enough time at the TRO stage to fully consider all outcome-determinative aspects of complex matters, so if a judge believes that irreparable harm is imminent, a TRO might come down just to prevent a tragedy, even though a PI might subsequently be denied. Epic is still trying to persuade the court to #FreeFortnite, but that part is again doomed to fail, given that Epic could simply publish an iOS version of the game that wouldn't offer alternative payment mechanisms. Epic itself accepted and complied with those terms for years, and all that Apple says it wants is compliance with its longstanding standard terms. For Apple it's certainly going to be a challenge to defeat the Unreal Engine part of Epic's motion this time around, but such an outcome is nowhere near as inconceivable as a free pass for Epic to violate Apple's App Store terms while litigation over whether or not those terms violate the antitrust laws is still in progress.

Apple filed its opposition brief late on Wednesday, September 15 (this post continues below the document):

20-09-15 Apple's Opposi... by Florian Mueller

Apple attached multiple declarations (including two that are basically economic expert reports) to its opposition brief. Before I discuss Apple's brief as a whole, and the other declarations, I'd like to highlight what is nothing short of a bombshell accusation of bullying that I just found in a sworn declaration by Mike Schmid, Apple's Head of Games Business Development for the App Store (click on the image to enlarge; this post continues below the image):

Here's the same paragraph as plain text, making it easier to read on some devices:

"19. Epic has repeatedly leveraged the global phenomenon that was Fortnite to coerce platforms to change their rules. For example, in September 2018, Epic quietly updated Fortnite to enable cross-platform play between PlayStation and Xbox. This was explicitly against PlayStation's rules and Epic pushed PlayStation into a difficult situation with its own user base, where it was forced to make a significant change on Epic's terms, not its own. Epic's strategy of coercing platforms for its own gain, under the guise of being 'pro-gamer,' is something Epic continues to do." (emphasis added)

What Apple just told the court is that the "hotfix" (which Apple said became Epic's "hot mess"), which activated an alternative payment mechanism in Fortnite by simply having a server tell the client to do so, was not the first case of Epic being sneaky in its dealings with a major games platform. According to Mr. Schmid's declaration, "Epic quietly updated Fortnite to enable cross-platform play" between the PlayStation and Xbox versions of its flagship game. Then PlayStation (a Sony subsidiary) modified its rules to bless Epic's breach, as opposed to taking the measures that it could have for breach of contract. Apparently, Sony determined that it was better to soften than to enforce its rules. There was probably more, relatively speaking, at stake for Sony than for Apple, which is part of the reason why the latter is still unwilling to make an exception for Epic or to change its rules for everyone. But it's also about philosophies, and Apple is Apple while Sony is Sony.

Mr. Schmid's declaration also provides some information on the economic relevance of iOS to Epic's business. In this legal dispute, Epic obviously wants the court to believe that its economic viability is under threat if the App Store doesn't carry Fortnite. There's no question that Epic has made a ton of money on iOS in absolute terms, "enjoying nearly 130 million iOS downloads globally—and earning Epic more than $550 million through iOS alone." But apparently Epic told Apple the opposite of being irreparably harmed if it couldn't publish iOS apps:

"18. On a variety of occasions, Epic personnel have told me [Mr. Schmid] that if Apple did not comply with its demands, Epic would simply terminate its relationship with Apple and remove its games off of the iOS platform. Epic has repeatedly told me that it could do this because Apple is the 'smallest piece of the pie' when it came to Fortnite revenue. On several occasions, Epic personnel have told me that Apple represents just seven percent of Epic’s revenue. The data available to Apple largely bears this out. With respect to Fortnite, all of the App Store's competing platforms besides Google's Android have a higher Average Revenue Per Daily Active User (ARPDAU) than does Apple iOS, with some platforms—like Xbox and PlayStation—a full 70% or 40% higher than iOS, respectively."

The above is perfectly plausible. Per-user revenue is typically lower on Android than on iOS, with a large part of the installed base of Android being in relatively poor economies (which is why some Android game makers pursue more advertising-centric revenue strategies in parts of the world than in the United States and Europe). But volume makes up for some of this, so for Epic, Android might still be a greater revenue opportunity than iOS. It comes as no surprise that game console users would spend more money playing Fortnite, given that those who are very much into games in general and a shooter game like Fortnite in particular will want to play it on a large screen and with game-specific input devices rather than a touch screen.

Those numbers are going to create a serious credibility problem for Epic with the court.

Again, I'm going to comment on Apple's brief and the other declarations later, but thought many of you would find Mr. Schmid's revelatory declaration extraordinarily interesting. Finally, here's the document:

20-09-15 Mike Schmid Declar... by Florian Mueller

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Fortnite usage on iOS has declined by over 60% since removal from App Store, Epic Games says in motion for preliminary injunction against Apple

Early last week, Epic Games lost the first round of its #FreeFortnite battle against Apple when Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California denied the Fortnite maker's motion for a temporary restraining order (TRO) with respect to the company's flagship game. But Epic won a consolation prize: the court held, on a highly preliminary basis (TROs are only in effect for a couple of weeks and then go away unless replaced by a preliminary injunction), that Apple's termination of an Epic developer account needed to improve and maintain the Unreal Engine was an overreaching form of retaliation and, therefore, not allowed in the short term.

The outcome was consistent not only with the inclination Judge Gonzalez Rogers indicated throughout the TRO hearing, but also with Epic's reply brief shortly before the hearing, which prioritized Unreal Engine over Fortnite.

The preliminary injunction hearing on the same two issues--can Epic force Apple to tolerate a version of Fortnite that bypasses its in-app purchasing (IAP) system in contravention of App Store business terms, and can Apple terminate all of Epic's accounts for distrusting the company after what happened--will take place on September 28. The briefing process kicked off Friday night Pacific Time with Epic filing its motion for a preliminary injunction (this post continues below the document):

61 Epic Motion for PI Again... by Florian Mueller

In a tweet, Epic's PR department announced the motion and described it as a "necessary step to free consumers and developers from Apple's costly, anti-competitive control [over its App Store]" (this post continues below the tweet):

Today we asked the Court to stop Apple’s retaliation against Epic for daring to challenge its unlawful restrictions while our antitrust case proceeds. This is a necessary step to free consumers and developers from Apple’s costly, anti-competitive control. https://t.co/r2XxhitjMp

— Epic Games Newsroom (@EpicNewsroom) September 5, 2020

From time to time, this blog provides in-depth analysis and goes into more detail than most--and sometimes all--of the other coverage of the same issues. Yesterday I discussed Google's argument against "relating" Epic's cases over Android and the Play Store on the one hand and iOS and the App Store on the other hand, and this blog's most popular post so far on the Epic v. Apple and Google crusade provided an overview of the similitaries and differences between the two complaints.

But at this particular juncture the greatest favor I can do everyone is to distill just a few key aspects of Epic's motion into a relatively short post, and to point you to just a few of the dozens of documents attached to the motion. Like an executive summary.

In commercial terms, the following passages are interesting:

• "Daily active users on iOS have declined by over 60% since Fortnite's removal from the App Store."

• "63% of Fortnite users on iOS access Fortnite only on iOS."

• "Over 116 million registered users have accessed Fortnite through iOS—more than any other platform. [...] They have spent more than 2.86 billion hours in the app."

With a view to the prelimininary injunction standard, Epic's motion argues that the court should not force Epic to comply with terms the game maker describes as anticompetitive and, therefore, illegal, given that Apple could always get its 30% App Store cut later. The problem I (still) see here is that Epic's claim of irreparable harm is spuriously asymmetrical: the fact of the matter is that this works both ways. If Epic prevailed, it could also seek damages from Apple. It elected not to do so in its currently operative complaint, but that's just Epic's choice. Preliminary injunctions are not really for cases in which the problem can easily be solved later by means of a payment. Irreparable harm is something else, and in a way, Apple has a bit more of an irreparable harm argument when saying (as they did in the TRO context and probably will again) that other developers might do the same as Epic. The problem there would be that other developers might not be as deep-pocketed as Epic, and then Apple might actually face problems with recovering any damages.

The scope of the requested injunctive relief (I've uploaded the proposed order to Scribd) is consistent with what Epic sought before. Ssome of the terms may be deemed overbroad (such as enjoining Apple from terminating accounts on any "pretextual" basis, given that even the TRO Epic secured exclusively referred to whatever Apple might do on the basis of Epic's non-compliance with the App Store terms) by the court.

Microsoft keeps supporting Epic. Kevin Gammill, Microsoft's General Manager of Gaming Developer Experiences signed a second declaration (which I've uploaded to Scribd) in further support of Epic's push for injunctive relief against Apple. His first declaration was attached to Epic's motion for a TRO. It's possible that Epic's TRO motion would have failed in its entiretly if not for the psychological impact of Microsoft's first statement.

Antitrust cases are arguably the most complex and fact-intensive type of commercial litigation. That's a real problem when someone like Epic--in its push for being allowed to offer an alternative IAP method in Fortnite--wants a court to make some fast-track decisions such as a PI. The hurdle is now higher than for the TRO. The very short term during which a TRO is in force makes it more of an irreparable-harm argument. But even if this case really went to trial in less than a year (that's the current plan), that would be relatively long period. Therefore, the likelihood of a party prevailing on the merits plays a greater role now than it did last week.

Judge Gonzalez Rogers already said at the TRO hearing that this was not going to be a "slam dunk" for either Epic or Apple--and the case wouldn't be won or lost at the TRO or PI stages. That, of course, didn't dissuade Epic from making such an attempt anyway. "Apple is a monopoly" is the first sentence of the motion. But that's easier said than proved.

There are two key aspects of Epic's "quick win" strategy that I'd like to highlight. First, Epic's lawyers set a clear priority at this stage. They believe there's one antitrust theory (of several that Epic's complaint outlines) that the court can resolve even without any need for discovery: tying. Epic accuses Apple of tying its IAP system (which retains the 30% cut) to the App Store (and in parallel litigation they say Google is tying its IAP system to the Android Play Store). As for the legal standard for tying, Epic refers to the Ninth Circuit's 2008 Cascade Health Sols. v. PeaceHealth decision:

"For a tying claim to suffer per se condemnation, a plaintiff must prove: (1) that the defendant tied together the sale of two distinct products or services; (2) that the defendant possesses enough economic power in the tying product market to coerce its customers into purchasing the tied product; and (3) that the tying arrangement affects a not insubstantial volume of commerce in the tied product market."

The second key aspect of Epic's efforts to convince the court within a few weeks of something that most of the time takes years to sort out is that they attached a "declaration" (which actually reads more like an economic expert report, except that the author talks about what he believes he is likely to find as opposed to simply telling the truth, which is that he's made up his mind already) by Dr. David S. Evans, who runs an economic consulting firm named Global Economist Group out of Boston and is also the Co-Executive Director of the Jevons Institute for Competition Law and Economics at University College London (this post continues below the document):

62 David S. Evans Declaration by Florian Mueller

Dr. Evans is not new to the subject, and it's not like he's just beginning to form an opinion. Epic's motion cites to the award-winning book Matchmakers: The New Economics of Multisided Platforms, which he co-authored with MIT Sloan Professor Richard Schmalensee, and which (according to a footnote of Epic's motion) says, among other things, that Apple "invested great effort in stoking the supply of third-party apps, touting how many they had, and making it easy for users to get them", leading to "explosive growth."

The deadline for Apple's response is Tuesday, September 15. Three days later, Epic may reply, and another ten days later the hearing will take place.

I may have to update my assessment after those additional filings. For now I still believe Epic can't prevail at the preliminary injunction stage with respect to Fortnite. In that case, Epic will either put it back right away (by complying with Apple's terms), or maybe appeal that denial to the Ninth Circuit, where things would probably take a couple of months. As for Unreal Engine, it's going to be an uphill battle for Apple to make the judge change mind. A mixed ruling is most likely, and relatively speaking it's easier to imagine that both parts of Epic's motion would fail than that both would succeed.

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