FOSS Patents

[Update] The order (PDF, upploaded by The Verge) came down a few hours later and is consistent with what Judge Gonzalez Rogers said. [/Update]

On Monday afternoon, Judge Yvonne Gonzalez Rogers of the United States District Court for the Northern District of California held an Epic Games v. Apple motion hearing. At the outset, the judge outlined her initial inclination, which was to

• deny Epic's motion for a temporary restraining order (TRO) against Apple with respect to Fortnite, but to

• grant it with respect to Unreal Engine.

That inclination, which may very well--but won't necessarily--become the actual decision (the judge said a written order would come down shortly), is exactly what Epic's lawyers were pursuing as a Plan B when they focused on Unreal Engine in their reply brief.

Judge Gonzalez Rogers reminded attendees of the fact that a TRO needs to be replaced by a preliminary injunction (PI) after 14 days--unless extended by consent--or it simply goes out of effect. Therefore, even if Epic obtained a TRO now, Apple could still try to prevail with respect to Unreal Engine a couple of weeks later--and this goes both ways, so whatever Epic doesn't win immediately, it could still pursue in the next round. The PI hearing has been scheduled for September 28, so the TRO decision will be in effect for about a month. Whatever the court decides on Epic's TRO motion won't be appealable, but a PI decision will be.

Even though this emergency motion had to be briefed over what was basically just a long weekend, the judge was undoubtedly aware of everything that was in the parties' pleadings and the attached declarations and documents. She's familiar with some of the fundamental issues raised by Epic because she's been presiding over two other App Store antitrust cases (Pepper and Cameron) for some time.

That said, a TRO is more preliminary than a preliminary injunction. It appears that the court is very uncomfortable with allowing Apple at this stage to terminate the Epic contract that relates to the Unreal Engine. With respect to Fortnite, however, the case appears clear to the judge. She told Epic's counsel that they "didn't tell Apple you had code in there [for an alternative payment system]" and noted that "this was not an insignificant breach, hence the reason we are here." Counsel for Epic argued that her client merely "ceased complyi with an anticompetitive contract" or, more narrowly, "an anticompetitive provision." That argument, however, didn't seem to get much traction, at least not immediately.

The hurdle Epic faces in this regard is that the court would at this early stage already have to agree that Epic is going to win. It's apparently far too early for that. At least for the time being, Judge Gonzalez Rogers believes the case could go either way. It's "not a slam dunk for Epic or Apple," she noted.

Just like Epic's reply brief didn't even attempt to argue that Epic couldn't simply put back an App Store-compliant version of Fortnite, Epic's counsel wasn't able to explain why a TRO against Apple was absolutely needed. In other words, Epic didn't really give the judge a compelling reason to reconsider her position on Fortnite.

While there wasn't any sign of the judge having second thoughts regarding Unreal Engine either, the related discussion was definitely more interesting. Right now my prediction would be for a TRO to come down with respect to an Epic subsidiary's developer agreement, but it doesn't appear extremely unlikely that Apple might prevail on this one, too, when the court decides on a PI (or when the Ninth Circuit reviews such a PI decision).

The judge expressed concern over Apple having taken an overreaching step by announcing the termination of a developer agreement that "has not been breached." Formally, Epic Games, Inc. (a U.S. corporation) and Epic Games International S.à.r.l. (a Swiss corporation) are separate legal entities. But Gibson Dunn's Richard Doren argued on Apple's behalf that the same individuals manage the accounts, the developer fees are paid with the same credit card for both contracts, and Apple always terminates contracts of affiliate entities when a major breach occurs because otherwise a certain type of non-compliance (here, in the form of offering alternative payment methods) "would spread like a virus."

Mr. Doren also noted that if those two Epic entities were really as separate as Epic argues, there would be "no standing for a restraining order for the benefit of Epic S.à.r.l. as no filings had been made on its behalf (only on the U.S. entity's behalf). Representing Epic, Cravath's Katherine Forrest stresed that they never said the two companies were not affiliated, "just as any corporation may have subsidiaries"--but she insisted that there were "independent contracts" at issue.

All in all, I believe Apple has some interesting points to make with respect to Unreal Engine--and, in practical terms, they argue that Epic can solve the problem by publishing an iOS version of Fortnite that complies with Apple's App Store rules, in which case the developer agreement they need for their work on Unreal Engine will remain in force ("Unreal Engine will be back on track and Fortnite will be back on track," counsel for Apple said). But the court appears inclined to agree that there would be irreparable harm to Epic from such termination.

Assuming that the judge rules the way she was inclined, Epic will presumably claim that Apple had been found to go too far, but that would be an overstatement and oversimplification. There are different priorities at the TRO stage than later on. Judge Gonzalez Rogers said (in the narrow context of market definition, but I think it applies to other aspects of the case as well) that "the battle here will not be won or lost on the TRO and probably not on the [PI]."

It already makes sense to look past the TRO and focus on the PI decision, even though that process wil take another month. Should Epic fail to obtain a PI with respect to Fortnite, it will come under pressure from the Fortnite community to make Fortnite for iOS available again. An appeal of a denial of a PI would probably take too long for Epic's purposes. But would there even be a point in seeking a PI over Fortnite if the TRO decision is based on facts Epic simply can't change--other than continuing to be able to claim that Unreal Engine for iOS is in jeopardy, too?

Follow @FOSSpatents

Share with other professionals via LinkedIn:

In the Northern District of California, Epic Games just filed its reply brief in support of the Fortnite and Unreal Engine maker's motion for a temporary restraining order (TRO) against Apple (this post continues below the document):

20-08-23_doc43 Epic Games&#... by Florian Mueller on Scribd

Previously I reported on one of the three declarations Epic's lawyers submitted in support of that reply brief: the one by a Microsoft executive because it shows that the Windows, Office and Xbox company is backing Epic against Apple.

Epic's reply brief completely fails to address the legally most powerful part of Apple's opposition to the TRO motion: that Epic brought this situation upon itself, and "self-inflicted wounds" can't give rise to the requested type of relief in the Ninth Circuit. While Epic described as a "hotfix" its tactic of firstly running a Fortnite version by Apple that already contained the code for an alternative payment system and later triggering the display of that option to end users by means of data the Fortnite app retrieved from Epic's servers, Apple's opposition brief said this breach of a longstanding App Store rule became Epic's "hot mess."

Epic's decision not to address the "self-inflicted wounds" part is consistent with my overall impression that they've already given up with respect to Fortnite--not formally in the sense of a partial withdrawal of the motion, but practically. They must have realized that Judge Yvonne Gonzalez Rogers is hardly going to force Apple to offer a Fortnite version via the App Store that clearly breaches Apple's terms. Instead, Epic's reply brief focuses on the Unreal Engine, arguing that even if Apple was in its right to terminate any Fortnite-specific Epic accounts, "the breadth of Apple's retaliation is itself an unlawful effort to maintain its monopoly and chill any action by others who might dare oppose Apple." By "breadth" Epic means that Apple terminated multiple accounts, and that there are two Epic legal entities: Epic Games, Inc. of Maryland and Epic Games International S.à.r.l. of Switzerland. However, Apple argues that all those Epic accounts are managed as one, and Apple generally terminates the contracts of affiliated entities when a major breach occurs.

I don't intend to analyze the contractual part in detail now: the court hearing will take place tomorrow (Monday, 3 PM Pacific Time). Even with respect to the Unreal Engine, I still can't see how Epic would prevail, given that it has a simple option: to comply with the existing agreements while challenging their terms in court.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

After Apple filed its opposition to Epic Games' motion for a temporary restraining order (TRO) in the App Store antitrust dispute in the Northern District of California, Judge Yvonne Gonzalez Rogers allowed the Fortnite and Unreal Engine maker to file a reply brief of up to 10 pages by 9 AM Pacific Time today.

The very first document Epic's lawyers filed in this context is a declaration by Kevin Gammill, General Manager of Microsoft's Gaming Developer Experience division, supporting Epic against Apple by stressing the relevance of the Unreal Engine to Microsoft (this post continues below the document):

20-08-23_doc40 Cv5640 MSFT ... by Florian Mueller on Scribd

I don't doubt that Microsoft and other companies consider the Unreal Engine useful. My own app development company prefers Unity for our specific purposes, but we are fully aware of how powerful and versatile the Unreal Engineis.

However, what Mr. Gammill's declaration doesn't explain is why Epic couldn't live and comply with the Apple Developer Agreement it had been gladly and (very) profitably honoring for years. In that case, Epic's Apple Developer Agreement wouldn't be terminated, and the further development of the Unreal Engine wouldn't be affected by the ongoing litigation.

While Microsoft's Xbox division reportedly keeps the same 30% commission of app revenues as Apple, I already wrote last week that Microsoft presumably hates having to give 30% of its Office revenues on mobile platforms to Apple and Google.

If Apple hadn't revolutionized mobile computing with the iPhone, with Google then being a fast follower (they had the Android mobile operating system in the works, but it would have been more BlackBerry-like and then they changed direction when they saw iOS), Microsoft would still be the dominant operating system company. It wouldn't have to worry about Apple or Google getting a 30% cut. In the old computing world, Microsoft could simply have told Apple and Google that it just wouldn't make Office available on their platforms if it didn't get a better deal. Microsoft has meanwhile found opportunities in other areas, such as cloud computing, but may bear a grudge against Apple and Google because they simply displaced Windows on mobile devices.

Based on today's declaration it's clear where Microsoft stands, and it's not hard to figure out why, but the above declaration really doesn't strengthen Epic's case for a TRO. The key issue is still the one of "self-inflicted wounds," which the United States Court of Appeals for the Ninth Circuit doesn't accept as a pretext for seeking a TRO.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Apple just filed its response to Epic Games' motion for a temporary restraining order (TRO). As no one would have doubted, the iPhone maker opposes the Fortnite and Unreal publisher's motion in the strongest terms (this post continues below the document):

20-08-21 Apple's Respon... by Florian Mueller on Scribd

With respect to Epic's claim of suffering irreparable harm unless the court grants its motion, Apple's opposition brief is consistent with a statement it provided to The Verge a few days ago. The term "status quo" plays a central role here. The purpose of temporary relief is to prevent a party from changing a situation to the moving party's detriment in the absence of an injunction (a TRO is the fastest injunction, even more preliminary than what is called a preliminary injunction). Apple explains to the court that Epic's perspective on the status quo is, in reality, something else: the status quo would be for Epic to simply comply with Apple's App Store terms and policies, and with its developer agreement, while its antitrust complaint challenging those terms is pending. If, however, the court granted Epic's motion, it would allow Epic to get away with a breach of its contractual obligations. The requested TRO would not preserve the status quo. It would force Apple to modify its long-standing App Store terms.

Another key term--in connection with any type of injunction--is "irreparable harm." Epic's motion for a TRO argued that the unavailability of Fortnite on the App Store and, as a further consequence of Epic's non-compliance, the termination of its developer agreement (which would prevent Epic from using Apple's developer tools in the further development not only of Epic's games but also of its Unreal Engine) would constitute irreparable harm. Apple's opposition brief dismisses that theory and distinguishes between irreparable harm on the one hand and "self-inflicted wounds" on the other hand. The Ninth Circuit, which is the appeals court for (among many others) the Northern District of California, stated earlier this year that "self-inflicted wounds are not irreparable injury," quoting earlier decisions in this circuit and in the Seventh Circuit.

Apple's motion stresses that point not only in legalese but also in colloquial terms:

"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." (emphasis added)

Epic's motion explained what the Fortnite maker means by "hotfix." They submitted a version of Fortnite to Apple's App Store review that seemed to comply with Apple's in-app purchasing rules at the time. However, it already contained program code that made a request to Epic's server in order to find out whether it should offer an alternative payment method in addition to making payments via Apple's in-app purchasing system. A little over a week ago, Epic's server started telling the client (the Fortnite app) to make that additional offer, which is not permitted by Apple's app distribution terms. Epic threw down the gauntlet to Apple:

"Around 2am on August 13, Mr. Sweeney of Epic wrote to Apple stating its intent to breach Epic's agreements: “Epic will no longer adhere to Apple’s payment processing restrictions.'"

The term "hotfix" sounds like Epic just sent some new graphics or similar data down to the client. A "hotfix" is something that doesn't require a formal update, but has an impact on functionality. In this case, the "hotfix" was simply some data--presumably in an XML or JSON format--that told the client to activate some functionality Epic had secretly incorporated into the last approved update. Apple's motion doesn't use the term "Trojan horse," but that's what it is (not in the sense of a computer virus, of course).

The "hot mess" is that Apple had to remove Fortnite from the App Store. The only alternative for Apple would have been to waive a fundamental contractual obligation that iOS app developers have to meet.

Apple's brief quotes some Fortnite gamers (referring to a declaration by Epic's CEO Tim Sweeney):

"Some Epic customers, based on materials attached to Epic's motion, have seen through Epic's subterfuge to understand this is a problem of Epic's making. As one user asked Epic's customer support team after the takedown: 'Did you guys just screw over all your mobile players?' [...] One user predicted Epic would 'remove the illegal (according to Apple) update and be back to normal in no time.'"

That user predicts the same as I also wrote yesterday: I expect the TRO motion to go nowhere, but Fortnite to return to the App Store in the near term.

It's not publicly known how many of Fortnite's 350 million users run the game on iOS, but Apple's motion mentions "[t]ens of millions of iOS Fortnite players."

Unsurprisingly, Apple is not amused by Epic's PR campaign, the latest part of it is a #FreeFortniteCup "with prizes targeting Apple." That tournament will start on Sunday. IGN, a leading games website, wrote that "Epic turns its legal dispute into an in-game event."

All of what I just wrote is unrelated to the merits of Epic's case. For now the question is just whether Epic is likely to persuade the court to enjoin Apple, and I don't see that happening.

Large parts of Apple's response to the motion dispute that anything is anticompetitive about the App Store terms. Apple also disagrees that in-app payments are a separate market from the App Store. But it's too early--just about a week into this litigation--to discuss this in detail. Apple just has to convince the court that this isn't a clear and simple case under settled antitrust law. Apple's lawyers argue that the court would have to "create new law on a scant record" in order to grant Epic's motion.

Judge Yvonne Gonzalez Rogers will preside over the motion hearing (Monday 3 PM Pacific Time; via Zoom).

Finally, just an update to a recent post in which I mentioned three of the Gibson Dunn lawyers representing Apple in this case. The first-named attorney on today's filing signed up shortly after them: Theodore J. "Ted" Boutrous, whom some of you may have seen on TV.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Epic Games provoked Fortnite's removal from the iOS App Store and the Android Play Store by running a promotion that circumvented the in-app payment rules of those platforms--and already had that Nineteen-Eighty-Fortnite video as well as two partly-overlapping antitrust complaints, each more than 60 pages long, prepared at the time.

This legal dispute may very well take years to be resolved and go all the way up to the Supreme Court. Epic Games isn't seriously going to forgo its revenue opportunity on iOS (and Android) for the better part of the 2020s.

Epic would have us all believe that they're idealistic freedom fighters, the Braveheart of the mobile app universe. Realistically, they're more principled than a self-serving Spotify (trying to capitalize on the fact that the EU presently has the least principled competition commissioner in the bloc's history), but neither are they prepared to die for this cause nor are they just drama queens (well, maybe to some degree if that YouTube video is any indication). At the end of the day, they're businesspeople running a company recently valued at 17ドル.3 billion and trying to change some parameters in their favor. Also, I do find it credible that it's not only about money but also about their view of what would be fair.

I've been following high-stakes commercial disputes like this for a long time. There's only one circumstance that sets this one apart from cases like Apple v. Samsung or Oracle v. Google: Epic Games is privately-held, with a majority belonging to its founder Tim Sweeney, roughly 40% of the shares to China's Tencent (which also owns well over 90% of Supercell, for example), 1.5% to Sony (which I understand wants a 30% cut from developers just like Apple), and the rest to some financial investors and maybe some key employees. Officers of a publicly-traded company have a fiduciary duty toward other shareholders, which makes their key decisions more predictable. Here it's a major unknown how much leeway Mr. Sweeney enjoys--it depends on his non-public agreements with all those minority shareholders, some of whom have a purely financial interests and only one of whom (Tencent) may actually like the idea of Epic Games acting as a proxy warrior.

But even if Mr. Sweeney truly considered this a holy war and Epic's minority shareholders supported or simply couldn't do anything about it, Fortnite would realistically return to the App Store in a matter of weeks--or maybe months should it take surprisingly long.

There are litigants like Apple who mostly just let their lawyers speak and largely refrain from commenting on pending cases in public, and there are the likes of Qualcomm (who published an infographic when asserting patents against Apple) and Nokia (who are incessantly vocal about their ongoing dispute with Daimler and its suppliers of mobile communications components). The way Epic Games started this leaves no doubt they're at least as PR-focused as Qualcomm and Nokia combined. I don't want to take a position on accusations of Epic seeking to "weaponize" Fortnite gamers for its purposes, but it is fair to say that a mobilization effort of that nature and stature is unprecedented in smartphone-related litigation.

At least on Twitter I don't get the impression that Epic is off to a good start. They thought they came out swinging, but so far it appears Apple actually has broader support in the court of public opinion than Epic, which is a potential sign of some miscalculation on Mr. Sweeney's part. He may have made the mistake to assume that end users care as much about that 30% App Store cut as he and other developers do. I am an app maker--as I've repeatedly stated and will soon be more specific about when I announce my new game--, so Epic's campaign could theoretically benefit me, but I also have a reputation at stake here as a smartphone litigation commentator.

Someone as successful as Mr. Sweeney is ultimately rational, so what's the end game here with respect to Fortnite's availability on the App Store?

Epic would love to obtain a temporary restraining order (TRO) in order to deal Apple a first blow. That would be "la puerta grande" for Fortnite to return to the App Store. The motion hearing will take place on Monday, and I predict that Judge Gonzalez Rogers is going to be more than reluctant to enjoin Apple at this stage. From the perspective of a judge, it doesn't make sense that someone would purposely breach an agreement and then ask a court to enter an order within a matter of days only to prevent the other party (that met its own obligations) from triggering the contractually defined consequences of such conduct. As Apple told The Verge, they're happy to make Fortnite available again, provided that Epic honors the related agreements, which it had been doing for years and very profitably so.

Should Epic totally surprisingly get its TRO, then Fortnite will be back up on the App Store within about a week. Assuming the far more likely outcome, which is that Epic's TRO motion will be denied, it will happen, too--just a little bit later.

From a rational perspective, Epic has nothing to gain from a protracted unavailability of Fortnite for iOS after failing to win a TRO:

• By bringing the TRO motion, regardless of how much of a long shot it was in the first place, Epic has already shown to the court of law and the court of public opinion that it strongly believes in its views.

• Apple won't have to worry about damages Epic might be seeking later on. In that scenario, it would still be clear that Epic had access to the App Store and to Apple's developer tools, and all it had to do was to stop running a promotion that didn't comply with Apple's in-app payment rules. That wouldn't give rise to a huge damages award even in a best-case scenario for Epic.

• Maybe Epic is trying to work something out with Google (interestingly, I still haven't seen a TRO motion against the Android maker), but even if that happened, very few iOS users would switch to a different mobile operating system just because of Fortnite.

• There comes a point at which Epic's own iOS user base is going to be annoyed.

All things considered, I believe the most likely development is that the court will deny Epic's motion for temporary relief and Epic will then say it's disappointed but at least it tried, and now it must live with the decision, and in the interest of their customers, they will comply with Apple's rules again (for the time being, while pursuing their litigation) in order to make Fortnite available for iOS again and to ensure continued access to Apple's developer tools with a view to the Unreal Engine as well.

Whether a federal judge will be comfortable with the notion of her court being used as a PR tool by a multi-billion-dollar games company is another question. That may or may not be Epic's second miscalculation in the early stages of this dispute.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

In the 2010s, the most important legal battles surrounding smartphones and tablet computers were centered around patent infringement assertions (even Oracle v. Google, though the patent part went nowhere while the most controversial question of software copyright law took center stage and is now going to be adjudged by the Supreme Court). To the extent that major players brought antitrust claims against each other, they, too, involved patents, particularly standard-essential patents.

The strategically most important topic for smartphone-related litigation in the 2020s--though 5G and other developments will continue to give rise to patent disputes--may very well be the way the iOS and Android app stores are run. There's a lot at stake there, not only but first and foremost in monetary terms. Epic Games' long-planned and well-orchestrated litigation and PR blitz against Apple and Google is clearly bigger than any--if not all--of the pending patent cases combined, especially when considering that Capitol Hill is already looking into the same set of issues. We're still going to see spats over who invented what--but even more critical than IP ownership is the gatekeeper role that the major platform makers and app store operators play.

The Fortnite maker's two app store cases were processed by the Northern District of California's intra-district assignment system, which simply picks the next available slot:

• Epic Games v. Apple was assigned to United States District Judge Edward Chen in San Francisco (case no. 3:20-cv-05640). Judge Chen is already presiding over an antitrust case brought by Apple and Intel against Softbank-owned Fortress Investment, in which the plaintiffs just amended their complaint (after a dismissal without prejudice), with the defendants likely to challenge the first amended complaint, too.

• Epic Games v. Google went to United States Magistrate Judge Nathanael Cousins in San Jose (case no. 5:20-cv-05671). The parties will presumably decline to proceed before a magistrate, in which case this dispute might just end up on Judge Lucy H. Koh's docket.

These assignments make no geographic sense. Both Apple's and Google's headquarters are closer to San Jose than to San Francisco, but Google is further up north. So the assignments should have been made just the other way round.

Initial case management conferences have been scheduled in the Apple case for November 12, and in the Google case for November 18.

While Apple and Google impose different developer and app store contract terms, the cases have some overlapping questions of fact (relating to Fortnite, but also because either defendant will likely point to the other when denying or downplaying its own monopoly power) and, especially, law. Also, there would be a risk of divergent decisions. The least plausible scenario would be one in which Judge Chen would let Apple off the hook while Judge Koh (or a colleague of hers down in San Jose) would hold Google in violation of antitrust law, given that Google is less restrictive as there are alternative ways (though far less popular than Google's Play Store) to install Android apps ("sideloading" as well as app stores such as the ones run by Samsung and Huawei). I expect both cases to go up to the Ninth Circuit, where any inconsistencies could still be cured, but it wouldn't reflect favorably on the Northern District if it handed down irreconcilable decisions.

Consolidation won't happen automatically. Someone will have to take an initiative, and the court would have to agree that it's a good idea. I believe it would be, and in that case San Jose would be the logical venue for geographical reasons.

Epic is pursuing only injunctive and not monetary relief, so there's no need for a jury. But the one or two bench trials will be huge in every respect.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

An all-out war over Apple's App Store (and, in parallel, Google's Play Store) commissions is raging in the Northern District of California, where Fortnite maker Epic Games brought private antitrust lawsuits against both platform makers yesterday. Under the #FreeFortnite hashtag, a social media campaign appears to have huge momentum on Twitter right now.

In a matter of weeks I'm going to announce my new game, and it's going to have very broad appeal, much more so than the trivia game I launched in 2018. I bet it's going to be one of the most talked-about games of 2020. In its first release, it won't come with in-app purchasing, but we'll add that in our second release. Just like any other app developer, I'd like to keep more than 70% of the App Store and Play Store purchases my product will generate, but I try to distinguish that natural de$ire on my part from the manifest antitrust violation some folks allege. For now I'm still at the opinion-forming stage.

Based on what is known about Spotify's positions (as some of the correspondence between Apple and Spotify was made public), its EU antitrust complaint against Apple is presumably just a self-serving attempt by a Swedish entity to capitalize on EU competition chief Vestager's protectionist tendencies. At least I can't see how my company is going to benefit from a Lex Spotify. Then there's the Pepper v. Apple class action, trying to make a case of consumer harm, but consumers won't truly benefit--it's a money-making scheme for class action lawyers. The sixth paragraph of Epic's N.D. Cal. complaint stresses what sets this case apart from (without mentioning them) the Pepper litigation and the Spotify complaint:

"Epic is not seeking monetary compensation from this Court for the injuries it has suffered. Nor is Epic seeking favorable treatment for itself, a single company. Instead, Epic is seeking injunctive relief to allow fair competition in these two key markets that directly affect hundreds of millions of consumers and tens of thousands, if not more, of third-party app developers." (emphasis added)

If that is so, then we're likely going to see quite some amicus brief activity by major app makers further down the road.

What I furthermore predict is that some organizations claiming to represent app developers, such as ACT, are going to run into a terrible conflict of interests because they won't be able to criticize their funding sources.

While it's too early for me to comment on Epic's case in detail, I just wanted to share an observation on who represents the Fortnite maker. The first lawyer whose names appears in the complaint is Faegre Drinker's Paul Riehle, a Bay Area antitrust attorney. But then there's a list of Cravath, Swaine & Moore lawyers, led by former FTC commissioner and U.S. Antitrust Assistant Attorney General Christine Varney. Two of the Cravath partners on her team represented Qualcomm in last year's FTC trial in San Jose: Gary Bornstein, who cross-examined one of the FTC's experts into oblivion, and Yonatan Even. A Ninth Circuit panel just ruled in Qualcomm's favor against the FTC. Messrs. Bornstein and Even were also listed among Qualcomm's counsel in the Apple antitrust litigation in San Diego, but that case settled during opening arguments, so Cravath chairman Evan Chesler was the only attorney to argue on Qualcomm's behalf before the trial was already over.

Epic Games relies on the same team of lawyers in a parallel case against Google in the same district, which may very well get consolidated into the Apple litigation.

Follow @FOSSpatents

Share with other professionals via LinkedIn:

Before the Christmas weekend, Apple and Nokia went back to legal war against each other, more than five years after a settlement. I agree with Apple that Nokia's industrial-scale privateering is highly abusive, and I wish Apple luck for both its antitrust suit against Nokia and its defense against Nokia's patents. I followed Nokia's last scattershot litigation (against HTC, from 2012 to 2014) and I saw countless Nokia patent assertions fail, mostly in Germany but also in the most difficult U.S. patent litigation venue, the International Trade Commission. I would really be surprised if the patents Nokia is presently asserting against Apple were, on average, better than what they used against HTC. Based on this assumption, I believe Apple can handle this and Nokia will probably end up with a result below (or even far below) its initial expectations.

In my previous post, I already wrote that Nokia's "all-out war and global carpetbombing" would "probably not sit well with Cupertino." When I wrote that, I had no idea that the next Apple-Nokia news was going to be that Apple removed Withings' iOS-compatible eHealth devices from its store. Seven months ago, Nokia completed its acquisition (PDF) of Withings, a French digital health company founded in 2008, for approximately 190ドル million.

I haven't found an official Apple statement, but it would be quite a coincidence if the delisting of those products had nothing to do with the patent dispute. A coincidence is made even less likely by the fact that this happened during the iTunes Connect Holiday Shutdown (December 23-27), a period when no new app reviews take place, which shows it's the part of the year when Apple doesn't usually want to change its catalog.

When I go to the Apple website and search for certain Withings products, I get the same message as the one reported in the media, basically saying the products are no longer available but they have a list of alternatives. I managed to download Withings' Health Mate app to my iPhone 7 Plus over here in Germany. I opened it once, just to check, and then I deleted it immediately because I don't want to support patent abusers in any way (unless they have products to which I can't find a viable alternative, which is not the case here).

A reader just told me that one can presently download five Withings apps from the U.S. App Store. It appears that Apple just removed Withings' physical products (which it also used to distribute in its stores).

I'm an iOS app developer myself (my first product will be launched soon) and I've checked the terms of Apple's developer agreement for anything that might trigger the removal of Withings' stuff form the App Store. The developer agreement doesn't allow reverse engineering of certain materials, and if Nokia brings infringement assertions against them, there is a possibility that some reverse engineering occurred. Also, Apple has reserved the broadest possible discretion for its decision to unilaterally terminate the agreement.

Nokia's litigation tactics and privateering ways are, without a doubt, vexatious. So I couldn't disagree with Apple if it made the case that it's just not reasonably acceptable for Apple to have to do "business as usual" with a Nokia subsidiary under the present circumstances.

However, if Apple ever went beyond removing Withings' physical products and also delisted its apps, I doubt that the leverage Apple might get from this would be worth the cost. The problem is that app developers like me need to rely on Apple giving all of us fair access to its customer base. Yes, Apple has the right and it always should have the right to reject or delist apps under certain circumstances. Case in point, I have expressed support here for Apple with a view to its disagreement with Spotify. But Apple should always remember: with great power comes great responsibility.

As app developers, we make enormous investments of money, energy, creativity, and time. For example, I started my project almost three years ago and made the first four hirings in 2014. When you make all of this effort and investment, you want to have certainty that Apple will give your products a fair review and won't just shut you down arbitrarily. I'm not saying that a removal of any Withings apps would be arbitrary; it could be an exceptional case and app developers like me usually don't have to worry about this. Also, should Nokia have violated the clause that prohibits reverse engineering, then I'll agree with Apple, but we just don't know. What I do know is that Apple reserves termination in its sole discretion, which is fine as long as we can all rely on Apple not abusing that discretion. A silent removal of apps would be bad because it would be intransparent. Apple should at least provide an explanation that makes all other app developers comfortable in case it delists any Nokia apps.

Apple is normally very rational. The removal of Withings' physical products from its store is one thing, but delisting Withings' apps would appear emotional if it happened.

Nokia spent much less on its Withings deal than it almost certainly expects to collect from Apple every year in the form of patent royalties every year. This here is not going to make Nokia back down. It will show to Nokia's senior leadership that a pissing contest with Apple is a bad idea, but it doesn't solve the fundamental problem that Nokia doesn't have much of a product business that Apple can attack. Maybe Apple holds some patents (such as the ones it acquired from Nortel) that it can use against Nokia's wireless infrastructure business (the former Nokia Siemens Networks business), unless past license agreements between Nortel and Nokia make that impossible. Maybe there are some new patents Apple could acquire somewhere to countersue Nokia. But there won't be nearly as much of an opportunity for countersuits (if any) as in 2009-2011, when Nokia was still a handset maker.

If Apple really wants to flex its muscles to demonstrate to Nokia that excessive aggression backfires, it should use law firms and strawman litigation firms such as Skepsis Telecom to launch invalidation strikes against many--and by "many" I don't mean 10, 20 or 30, but more like 150, 200 or 300--Nokia patents in different jurisdictions. Apple can afford the prior-art search for this. It can afford all those petitions for reexamination or revocation and the German nullity lawsuits. That would really teach Nokia and any other aggressor of that kind a lesson, and it would devalue their portfolios and make their investors nervous.

Nokia itself and its closest ally in that context, HTC, started about 100 proceedings against different IPCom patents in different jurisdictions, including Italy, where all they wanted was to slow-roll proceedings in other jurisdictions (called the "Italian torpedo"). It hoped that IPcom would run out of cash, but IPCom had received enough money from investors and from other licensees that it was able to handle all of this. And IPCom's founder could handle it, too: it was certainly an annoyance but also generated additional fee income for his own law firm. For Nokia, this would be a different situation. It's publicly-traded, meaning that investors may sell shares on any bad news from the litigation front. And to the best of my knowledge, its management doesn't own the law firms that represent it.

The only risk is that some Nokia patents might emerge stronger if they were reaffirmed by courts and patent offices. But that's where Apple can use its judgment and really focus on those 150 or 200 patents against which it can field extremely strong prior art.

Make Nokia bleed patents!

Follow @FOSSpatents

Share with other professionals via LinkedIn: