Earlier this week, Epic Games filed for a temporary restraining order to prevent Apple from removing Fortnite from the App Store and prevent the company from terminating their developer’s account along with access to developer tools the company needs to develop the Unreal Engine for iOS. On Friday, Apple’s legal team filed their counter-motion for the dismissal of the motion for the temporary restraining order.
In the 34 page filing, a full six pages alone are dedicated to preexisting legal cases to establish the precedent for the dismissal and to refute Epic’s claims of potential injuries if the restraining order is not issued.
Though the entire document in itself is worth a read, I’ve taken some choice selection to provide context into Apple’s argument. Apple contends that Epic’s removal from their app store and the termination of their account stems from their breach of the terms of services. The company argues that this breach is remediable by Epic, if Epic agrees to their terms to return to the status quo before they attempted to slip the new payment processor by the review process. This is not an opportunity smaller creators would be offered, but Epic’s size affords them special treatment, if only they would accept it.
Apple proceeds to point out the obvious: Epic simply doesn’t want to have to pay Apple a single cent, but be able to capitalize on access to their storefront, tools, and marketing. A sentiment that Apple would spell out more clearly in later sections of the filing that are omitted from this article for length’s sake.
Hilariously, Epic’s attempt to control the narrative among the consumers helped Apple establish Epic proceeded into the breach of terms with intent. Not only did they do so, but they cannot demonstrate there will be irreparable harm, nor do TROs exist to prevent companies from suffering the consequences of “self-inflicted wounds.”
First, TROs exist to remedy irreparable harm, not easily reparable self-inflicted wounds, particularly under the Ninth Circuit’s exacting standard for a mandatory injunction. Here, Epic executed a carefully orchestrated, multi-faceted campaign, complete with a parody video, merchandise, hashtag, belligerent tweets and now a pre-packaged TRO. All of the injury Epic claims to itself, game players, and developers could have been avoided if Epic filed its lawsuit without breaching its agreements. All of that alleged injury for which Epic improperly seeks emergency relief could disappear tomorrow if Epic cured its breach. Apple has offered Epic the opportunity to cure, to go back to the status quo before Epic installed its “hotfix” that turned into its hot mess, and to be welcomed back into the App Store. All of this can happen without any intervention of the Court or expenditure of judicial resources. And Epic would be free to pursue its primary lawsuit. But Epic does not want to remedy the harm that it contends requires immediate relief because it has a different goal in mind: it wants the Court to allow it to free ride on Apple’s innovation, intellectual property and user trust.
Second, Epic has not and cannot show that it is likely to succeed on the merits of its novel antitrust claims. The App Store has exponentially increased output, reduced prices, and dramatically improved consumer choice. As the Ninth Circuit declared just last week, novel business practices—especially in technology markets—should not be “conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use.” United States v. Microsoft Corp., 253 F.3d 34, 91 (D.C. Cir. 2001) (quoted in Federal Trade Comm’n v. Qualcomm Inc., 2020 WL 4591476, at *9, __ F.3d at __ (9th Cir. Aug. 11, 2020)). Epic, however, does not undertake any “elaborate inquiry” in its motion. For example, it fails to enlist any economist to support its contrived market definitions and “tying” theories. It conveniently ignores that Fortnite can be played on numerous platforms with or without support from Apple, even as Epic touts that fact in its advertising and communications to users. See https://www.epicgames.com/fortnite/en-US/news/freefortnite-cupon-august-23-2020 (“Just because you can’t play on iOS doesn’t mean there aren’t other awesome places to play Fortnite.”). And it fails to contend with the fact that its logic would make monopolies of Microsoft, Sony and Nintendo, just to name a few. The lack of factual, economic, and legal support is unsurprising because Epic’s antitrust theories, like its orchestrated campaign, are a transparent veneer for its effort to co-opt for itself the benefits of the App Store without paying or complying with important requirements that are critical to protect user safety, security, and privacy.
Later in the filing, Apple lays out how the law says that companies are permitted to choose what parties with whom they conduct business. They provide several case law examples establishing this precedent holds up in both the physical and digital marketplaces. Despite that fact, Apple highlights how the law has said even if they are monopolistic, they are still free to bring their product to the market whenever and however they wish.
Apple proceeds to establish two facts. First, their app store and phones are not essential facilities. Thus they are well within their legal bounds to refuse access to whomever and whenever they so wish, so long as it does not violate any other law. In Epic’s case, their denial does not violate any law that regulates the digital market. In fact, the established law and precedent favor Apple over Epic on the matter.
Further crumbling Epic’s argument, Apple details how they are not “denying” Epic access to their services. These services can be fully restored, but Apple requires Epic to comply with their Terms of Service, of which the latter company refuses to do.
3. Apple Has Not Engaged in Anticompetitive Conduct
Removing Epic from the App Store and, absent a cure of its breach, the Developer Program due to the breach of its agreements with Apple is legal conduct: “businesses are free to choose the parties with whom they will deal, as well as the prices, terms, and conditions of that dealing.” Pac. Bell Tel. Co. v. Linkline Commc’ns, Inc., 555 U.S. 438, 448 (2009) (citation omitted); see also Qualcomm, 2020 WL 4591476, at *11 (same). If the App Store were a brick-and-mortar store, it would be obvious that Apple could choose which products to distribute, which customers to sell to, and on what terms. The antitrust laws cannot condemn Apple for following the terms and conditions in place since 2008 upon which it made its App Store available to Epic and other developers. Cyber Promotions, Inc. v. Am. Online, Inc., 948 F. Supp. 456, 461-62 (E.D. Pa. 1996) (denying TRO; “the federal antitrust laws simply do not forbid AOL from excluding from its system advertisers like Cyber who refuse to pay AOL any fee”).
Epic’s claim also depends on holding that Apple’s App Store requirements—which ensure security, privacy and a quality user experience—are a “tie,” monopoly maintenance and a violation of the rule of reason. Product and technology choices such as how Apple structures the App Store and its Guidelines do not constitute anticompetitive conduct. In re Apple iPod iTunes Antitrust Litig., 2014 U.S. Dist. LEXIS 165276, at *7 (N.D. Cal. 2014); Allied Orthopedic Appliances, Inc. v. Tyco Health Care Group L.P., 2008 U.S. Dist. LEXIS 112002, at *55-56 (C.D. Cal. 2008); Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 286 (2d Cir. 1979) (“any firm, even a monopolist, may generally bring its products to market whenever and however it chooses.”). The evidence that the App Store and its requirements are genuine innovations cannot seriously be disputed.
4. Apple Has Not Denied Epic Access to an Essential Facility
Epic’s claims that iOS is a “paradigmatic essential facility” are factually and legally untenable. TRO Mot. at 22. As a threshold matter, the Supreme Court has never adopted the essential facilities doctrine and the theory has been heavily criticized. 3A Areeda & Hovenkamp, ANTITRUST LAW ¶ 771c, at 173 (4th ed. 2015) (“t]he essential facility doctrine is both harmful and unnecessary and should be abandoned.”); Intergraph Corp. v. Intel Corp., 195 F.3d 1346, 1356-59 (Fed. Cir. 1999); see also id. at 1357 (“The courts have well understood that the essential facility theory is not an invitation to demand access to the property or privileges of another, on pain of antitrust penalties”). Epic claims that Apple has denied it access to “iOS,” but that is simply false. Apple offers Epic and every other app developer access to iOS through the License Agreement. Schiller Decl., Ex. B. And as Mr. Sweeney explains, even after Apple removed Fortnite from the App Store, Epic is still making Fortnite sales via the iOS app and through IAP. Sweeney Decl. ¶ 11. That alone is fatal to Epic’s essential facility claim, regardless of whether iOS can be deemed an essential facility. Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko LLP, 540 U.S. 398, 411 (2004) (“where access exists, the [essential facilities] doctrine serves no purpose.”); MetroNet Servs. Corp. v. Qwest Corp., 383 F.3d 1124, 1130 (9th Cir. 2004) (rejecting essential facilities claim because “reasonable access to the essential facility exists”).
Epic’s essential facility claim is nothing more than a refashioned refusal to deal claim. And here, Epic’s claim is dead on arrival because it cannot sidestep the reality that there was no actual refusal to deal, as discussed above. Aerotec, 836 F.3d at 1183. Moreover, “the doctrine does not guarantee competitors access to the essential facility in the most profitable manner.” MetroNet Servs. Corp., 383 F.3d at 1130. There is no antitrust obligation for Apple “to deal under terms and conditions favorable to its competitors.” Linkline, 555 U.S. at 450-51. The Supreme Court has twice ordered dismissal of such claims as a matter of law. See id.; Trinko, 540 U.S. at 410-11.
It is equally well settled in the Ninth Circuit that Apple owes Epic no duty to deal in light of Epic’s breach of its contractual obligations and its threats to bring a lawsuit which culminated filing this case. Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 889-90 (9th Cir. 1982); Optronic Tech. Inc. v. Ningbo Sunny Elec. Co., 414 F. Supp. 3d 1256, 1269 (N.D. Cal. 2019) (“a company may refuse to deal with an entity that sues the company without contravening antitrust laws.”).
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Conclusion
A “business relationship gone sour—even where plaintiffs risk losing money or risk loss of partnership rights in the short term—without more, does not constitute” an “emergency” that “justifies this court setting aside the court’s hundreds of other important, earlier-filed matters to immediately address this matter.” Goldberg, 2017 WL 3671292, at *5. For the reasons set forth above, Defendant Apple respectfully requests that the motion for a TRO be denied.
Right now, both filing’s are in the hands of the Judge who will rule upon them shortly. Epic for simplicity sake, is screwed on the matter. Precedent and the law both establish the courts cannot compel two entities to conduct business with one another. Nor can they further reward one entity for breaching the terms of service without eliminated the powers terms of services have.
Were the Judge to grant the restraining order, it would mean the courts can both compel business wherein no contract exists, and terms of service no longer have legal standing in the eyes of the law. Even if the Judge were inclined to agree with either position, the sheer backlash alone from numerous corporations would likely end the Judge’s career. After all, the law is as much political as is adherence to the legal institutions by which it draws its power.
For these reasons, Epic is likely to lose on its motion. They lack a legal framework to justify the compelling of their motion and ask the courts to step beyond established law to grant it.
