Trial in the Epic Games v. Apple case kicked off this week, with plenty of developments for all. I’ve written about this case several times before, but for those who aren’t up to speed: Epic Games has challenged Apple’s restrictive policies that require developers to sell iPhone apps through Apple’s App Store, to use Apple Pay to pay for in-app purchases, and to pay Apple 30% of all Apple-derived revenue.
I’m going to discuss some of the highlights from the trial and explain how they fit into the bigger picture.
Takeaway One: High-Tech Trial, Low-Tech Courts
Ironically, the trial between two tech titans has fallen victim to embarrassing technical glitches. To facilitate public access to the trial, the court agreed to host proceedings over Zoom and to allow members of the public to listen in. However, the court couldn’t figure out how to mute the public line, which allowed several Fortnite fans to invade the trial with screams of “Free Fortnite,” “I would suck all of you to get Fortnite mobile back,” and the like. This isn’t the first time the legal profession has had trouble with Zoom proceedings. A few months ago, a lawyer was unable to figure out how to turn off his cat filter, resulting in an extended dialogue where he had to assure the judge he was not a cat.
The other major technical glitch came with the court’s filing system. Because cases often involve confidential documents, courts have special procedures parties can use to file documents without revealing them to the public. While we don’t know exactly what happened here, we do know that files that were supposed to be kept secret were released to the public. This may have resulted from an intentional leak, from the fact that the court’s e-filing system is antiquated, or from something else.
While the leaked documents are certainly interesting, it appears that they are only marginally relevant to the issues being discussed at trial with Epic Games and Apple.
Takeaway Two: Market Definition Is Key
One of the most important issues in the case — perhaps the most important issue — is how to define the “relevant market.” If the market is for video games as a whole, things will be harder for Epic, as there is plenty of competition and price variation in the market for video games (as demonstrated by the robust console market, Steam, and even the Epic Games Store). On the other hand, if the market is for iOS apps or video games, things will be harder for Apple, since Apple explicitly requires everyone to use its marketplace and exerts tight price controls.
The first week of trial focused largely on the market definition issue. Thus, the evidence presented this week was largely focused on Epic’s business plan, revenues (high), efforts to promote cross-platform play (many), and distribution of users across various platforms. One of the more interesting exchanges relates to the baseline question of how to define a “game” in the first place. The parties will use this nuts-and-bolts evidence to show why their respective market definition is preferable to that of their opponent.
For example, Apple will argue that Epic Games’ efforts to promote cross-platform play support Apple’s position that the market definition should encompass all platforms that support Fortnite. Likewise, Apple will argue that the 30% cut it demands from app developers is similar to the fees charged by Sony and Microsoft and amounts to a market-wide standard. For its part, Epic will argue that customers with iOS devices are “locked in” to the Apple ecosystem because of high switching costs: How many Fortnite users could afford to switch devices? How many would be willing to make a $1,000+ expense to avoid relatively smaller iPay fees?
I expect that this issue will stay in the spotlight for the duration of the trial.
Takeaway Three: Epic v. Apple Content Moderation
Apple’s most prominent justification for preventing developers from opening their own app store is based on a theory of consumer protection — Apple wants to retain the ability to curate and moderate apps to ensure that iPhone users have a positive experience by protecting them from malware and “offensive” content, as well as by preventing digital piracy. One of the issues at trial is whether Apple’s stated interest is genuine or whether Apple is simply using cybersecurity and content moderation as a pretext to foreclose competition.
This played out in a pretty interesting way. Epic argued that Apple doesn’t meaningfully review apps for malware, that there are thousands of pirated, fraudulent, and offensive apps available in the App Store, and that Apple uses its content moderation to censor ideas it doesn’t like. (Check out slides 52-62 of Epic’s opening slide deck to see their evidence on this point.) Apple, on the other hand, used the Epic Games Store (EGS) as an example of what it seeks to avoid.
Late last month, Epic added the itch.io store to EGS. Itch was designed to give developers unfettered discretion to sell what they want, how they want, with no editorial oversight. This includes “adult” games that many may find objectionable. During the trial, Apple attempted to embarrass Epic by asking it to defend some of itch’s more salacious offerings, including Sisterly Lust, a game whose description — according to Apple’s attorney — “includes a list of fetishes which include many words that are not appropriate for us to speak in federal courts.”
Unfortunately, Epic fell for the trap. Instead of praising itch.io as a place where developers can freely express themselves, Epic’s witness — the manager of EGS — stated that he doesn’t “support sexualized content of any sort” and suggested that he would take action to remove the salacious content. While this issue is something of a sideshow, I still chalk it up as a win for Apple. The better answer — both for Epic and in general — would be that Epic trusts users’ ability to decide for themselves what they want to play and that users can choose to stick to the main Epic Games Store if they want to avoid adult content.
Source: Court Slide Deck
Takeaway Four: Tech Gossip
While not significant from a legal perspective, there was plenty of interesting industry news that came from the trial. A few nuggets that may be of interest:
- Epic Games CEO Tim Sweeney doesn’t have a PlayStation 5 and hilariously doesn’t know how to use a Nintendo Switch.
- Apple CEO Tim Cook didn’t know who Tim Sweeney was until somewhat recently.
- Epic spends tens of millions of dollars for its various free game promotions.
- Epic spends hundreds of millions of dollars to obtain EGS exclusives.
No Clear Trial Winner Between Epic Games and Apple Yet
At this point, it’s hard to make any meaningful predictions as to how this case will turn out. Because it is a bench trial, the case will be decided by a judge rather than a jury. Unfortunately, this doesn’t make it any easier to predict the outcome, since the judge is playing her cards close to her chest. As I wrote before, Epic seems to have lost much of its credibility with the court. However, that doesn’t mean it’ll lose, and enough time has passed that it could have made up for lost ground. With two weeks left to go, there’s still plenty of time for both sides to present a compelling argument or to make a huge mistake.
If you’re interested in following the trial live, you can dial in to the public listening line. Just make sure you have your phone on mute. And that you aren’t a dog.
