FOSS Patents

Shortly after an unconditional-clearance decision by Brazil's antitrust authority, Microsoft's acquisition of Activision Blizzard has received another major endorsement:

Strauss Zelnick, the CEO of Take-Two Interactive (best known for its Grand Theft Auto series, and the third-largest publicly traded game maker in the Americas and Europe), has declared himself in favor of the deal as Yahoo! was first to report. He says it's a good thing for the industry and will create opportunities for other games companies (such as Take-Two).

Take-Two acquired Farmville maker Zynga to build up muscle in online games, just like Microsoft's primary reason to buy Activision Blizzard (or Activision Blizzard King, reflecting the importance of Candy Crush) is to become a major player in mobile gaming. The CEO of Microsoft Gaming, Phil Spencer, explained this again a few days ago in an interview. The #2 reason he mentioned is that company's strength in PC games.

In that video interview, Mr. Spencer mentioned the Warcraft, Diablo, and Starcraft franchises. During my Blizzard years, we launched Warcraft II, Diablo I, and Starcraft I, and my names appears in the credits of all three of those mid-1990s titles. As you might imagine, it feels very special when I now hear a senior executive of one of the world's largest corporations discuss the importance of those games:

Microsoft wants to open up game distribution, which is why Google is lobbying against the transaction. Open markets are not in Sony's interest either: it capitalizes on its walled garden and is projecting its own strategic focus on exclusive content (it has gobbled up numerous game development studios in recent years) onto Microsoft.

My guess is that Take-Two is just too afraid of being disadvantaged by Apple and Google, and that may be the reason why the company isn't officially supporting Epic Games' appeal against Apple. (Let me point you to my previous post, which discusses why the stage is set for a major reversal, even more so now that the names of the three judges who will decide Epic v. Apple are known.)

I have experienced my own problems with the mobile platform monopolies as a small app maker. I can't imagine that Take-Two likes Apple's and Google's app distribution terms and policies more than Epic Games or I do. It's just that not all of us are equally vocal about it. The current mobile app distribution universe is a tyranny, if not a reign of terror. If the market is opened up through some combination of legislation, regulation, and litigation, and if Microsoft then delivers on its promise of "better revenue and fair marketplace rules" by creating additional ways to connect game creators and players, many companies (such as Take-Two) will benefit. Hopefully the popularity of franchises like Warcraft, Starcraft, Diablo, Call of Duty, and Candy Crush will contribute to that.

In other--but somewhat related--news, Microsoft announced a partnership yesterday with Meta (Facebook). Xbox Cloud Gaming and Xbox Game Pass will come to the Meta Quest Store. Meta Quest is the company's virtual reality headset.

It was, in fact, one of the motivations for Epic to challenge Apple's and Google's app store monopolies that the future of gaming will in no small part involve virtual reality and agumented reality, and Epic was worried about the VR/AR world being subjected to similar rules as today's smartphones and tablet computers. That became known thanks to last year's Epic v. Apple trial.

GameSpot reported on the Meta-Microsoft announcement. That site has been around since the early days of the World Wide Web. In 1996, GameSpot published my first online article ever, which at the same time was my first English-language article: the "WarCraft II Insider's Guide," which "reveal[ed] facts not found in the game's documentation or in the Map Editor" because I obtained some information on the game's inner workings from my friends on the development team. While I can't find the article on GameSpot itself anymore, a third party cached it, and it's still referenced by Wowpedia, a World of Warcraft fansite.

It only takes a look at the first sentence of Google's blog post announcing new Google Play billing rules for Europe to discern disingenuity:

"Google has been a leader in platform openness for more than a decade, allowing for multiple app stores and avenues of distribution on Android, and piloting user choice billing."

• Compared to Apple, Google is a "leader in platform openness" indeed (for example, with respect to mobile browsers or--see my previous post--NFC payments), but that's like Greenland describing its climate as the warmest in a region where the only alternative would be Greenland.

• Those "multiple app stores" can't effectively compete with the Google Play Store. That's why Google's in-app payment rules are subject to regulatory scrutiny and antitrust litigation at roughly the same level as Apple's. Two years ago, Epic Games sued Apple and Google on the same day; there are near-parallel consumer class actions against Apple and Google's app stores in the UK; and in Australia, such cases were brought simultaneously.

• And, finally, "user choice billing" came into being because of regulatory and legislative pressure, not because Google wanted to "pilot[]" something. The term User Choice Billing is revealing: users already had the choice betwen different payment methods; what's needed is Developer Choice.

I do, however, agree with the gist of the second sentence--change is coming:

"[T]he recent passage of the Digital Markets Act will require Google Play and other industry players to adjust their current operating model for users in the European Economic Area (EEA)."

It's just that Google will have to do a lot more. If the only objective is to come across as more constructive and cooperative than Apple, yesterday's announcement may do the job, especially since Google is indeed acting "in advance of the DMA's effective date." But at least for now there is no indication of Google truly intending to avoid a clash with the European Commission over the question of whether it complies with the DMA. There are two identifiable issues: discriminatory treatment of app categories, and excessive charges.

Without providing any justification, Google says that games will not be allowed to offer alternative in-app payment methods:

"Google Play’s billing system will continue to be required for apps and games distributed via Play to users outside the EEA, and for games distributed to users within the [European Economic Area]." (emphases added)

There is no basis in the DMA for treating games differently. I've run a full-text search on the 193 pages of the DMA (Council version, which was also adopted by the European Parliament), and terms like "game", "gaming", or even "entertainment" don't occur even once. But "discriminatory" appears seven times (plus one occurrence of "discriminating" and one of "discrimination").

According to BusinessofApps, Google Play game revenues amounted to 37ドル.3 billion in 2021, while non-game app revenues totaled 10ドル.6 billion. So Google allows alternative payment methods only for the kinds of apps that account for less than a quarter of Google Play revenues.

On iOS, the split is different: 32ドル.8 billion for non-games (39%) v. 52ドル.3 billion for games (61%).

Google argues that its terms ensure its continued ability "to keep people safe on [Google's] platforms and invest in Android and Play for the benefit of the entire ecosystem." There is no reason for which alternative payment systems are less safe when used by games than by other apps. As for Google's ability to invest in Android, it has of course chosen a different business model than Apple. Google doesn't sell huge numbers of devices (though its Pixel business is growing); it monetizes the platform in various ways, one of which is Google Play. But that doesn't justify discrimination either.

Even non-game apps won't practically benefit from Google's new European in-app payment terms.

As I've already discussed in connection with Google's similar approach in South Korea, alternative payment systems that are taxed at the same rate (when considering the cost of using third-party payment systems like Stripe) don't open up the market in the slightest.

In the EU, that discount is 3%, which is also what Apple is trying to get away with in the Netherlands.

There's a clear pattern: Apple and Google ("Goopple") want to go into any rate-setting litigation with a maximum demand. So they impose the same app tax as before by merely reducing their commissions by what third-party payment processors charge. And they want to delay, delay, and delay.

The DMA won't change everything overnight. The Commission will have to designate gatekeepers. And there won't be public enforcement against everyone at the same time. Google may be hoping that it can just do enough that enforcement will focus on Apple for as long as possible.

Like any law, the DMA is interpretable, though it is a lot more detailed than similar legislation in other places. In Korea, just a few sentences were added to the country's Telecommunication Business Act. The DMA--including recitals--is almost 200 pages long.

Article 6(4) of the DMA focuses on app stores:

The gatekeeper shall allow and technically enable the installation and effective use of third party software applications or software application stores using, or interoperating with, its operating system and allow those software applications or software application stores to be accessed by means other than the relevant core platform services of that gatekeeper. The gatekeeper shall, where applicable, not prevent the downloaded third party software applications or software application stores from prompting end users to decide whether they want to set that downloaded software application or software application store as their default. The gatekeeper shall technically enable end users who decide to set that downloaded software application or software application store as their default to carry out that change easily.

The gatekeeper shall not be prevented from taking measures to ensure that third party software applications or software application stores do not endanger the integrity of the hardware or operating system provided by the gatekeeper, provided that such measures go no further than is strictly necessary and proportionate and are duly justified by the gatekeeper.

Furthermore, the gatekeeper shall not be prevented from applying measures and settings other than default settings, enabling end users to effectively protect security in relation to third party software applications or software application stores, provided that such measures and settings go no further than is strictly necessary and proportionate and are duly justified by the gatekeeper.

For third-party app stores this means that "Goopple" are allowed to take security measures, but those must not go beyond what is "strictly necessary and proportionate and [...] duly justified by the gatekeeper." The way Android currently treats sideloading and alternative app stores is clearly unjustified, disproportionate, and not necessary in its current form.

What the statute does not say is that gatekeepers are not allowed to charge app developers a cent. The DMA does, however, make it clear that any "general conditions of access" and other business terms must be "fair, reasonable, and non-discriminatory" (FRAND). In recital 62, the DMA specifically discusses this with a view to app stores:

"[...] In particular, gatekeepers which provide access to software application stores are an important gateway for business users that seek to reach end users. In view of the imbalance in bargaining power between those gatekeepers and business users of their software application stores, those gatekeepers should not be allowed to impose general conditions, including pricing conditions, that would be unfair or lead to unjustified differentiation. Pricing or other general access conditions should be considered unfair if they lead to an imbalance of rights and obligations imposed on business users or confer an advantage on the gatekeeper which is disproportionate to the service provided by the gatekeeper to business users or lead to a disadvantage for business users in providing the same or similar services as the gatekeeper. The following benchmarks can serve as a yardstick to determine the fairness of general access conditions: prices charged or conditions imposed for the same or similar services by other providers of software application stores; prices charged or conditions imposed by the provider of the software application store for different related or similar services or to different types of end users; prices charged or conditions imposed by the provider of the software application store for the same service in different geographic regions; prices charged or conditions imposed by the provider of the software application store for the same service the gatekeeper provides to itself. [...]"

There will be a foreseeable fight over what level of an app tax is FRAND. The Goopple duopolists have a history of making and supporting public statements in connection with standard-essential patents (SEPs), such as Apple complaining about "royalty stacking" even though its total iPhone SEP royalty spend is roughly 2%, and arguing that the royalty base should be capped. The fight over what constitutes a FRAND app tax appears inevitable, and it will likely be the biggest and hardest-fought FRAND dispute in history.

Nine months ago, to the day, I woke up after about four hours of sleep. With large parts of the world in lockdown, I started thinking about how a mobile game could make a useful contribution in the current situation and any future situation, as the SARS-CoV-2 pandemic is not the first and won't be the last of its kind.

I'll tell you in a moment what happened then, but fast foward from March 2020 to this weekend, and Viral Days (product website) is available for iOS on Apple's App Store, and for Android on the Google Play Store, [Update] the Huawei App Gallery, and the Samsung Galaxy Store [/Update]. Here's a gameplay video (this post continues below the video):

Back in March, some low-quality games from traditional genres, basically cheap knockoffs of titles like Angry Birds and Super Mario Bros., had been rethemed and rebranded as COVID-19 games. But they made no sense. You don't cure a disease by throwing toilet rolls at virus-like faces, or avoid getting infected by jumping over obstacles. What I wanted to come up with instead was a game that would really make a difference. A game that would

• demonstrate the problem of exponential propagation in a simplified, time-compressed form and

• promote several of the most effective ways to stop (or at least slow down) the spread of the virus.

After about an hour, I felt very good about my rough idea, and I luckily got another three or four hours of sleep. After waking up, I was (still) absolutely determined to turn this idea into reality. That same morning, before stores opened, I already had a call with Mario Heubach, whose company was doing contract development for my app development firm. We actually had been working together on another title--a highly interactive trivia game--since the summer of 2018 and were probably just a few months away from launching it. I was worried he'd declare me completely crazy to put a near-finished project on hold in order to start a new one. Let's face it: this is completely against conventional wisdom. But under the circumstances, what one would normally not even consider for a second was the right decision this year--we agreed on this much, and in early April, after some further conceptual work and research, development began. The Unity 3D engine was our obvious choice, and we also found valuable material on the Unity Asset Store.

We took our time to get it right--we really wanted to make a high-quality game--and finally submitted the app to Apple, Google, and Huawei yesterday. Apple and Google approved very quickly--they had previously taken a look at our beta versions. It's part of the history of this project that we initially had to deal with rejections, but I don't want to go into detail, at least now here and now. What matters is that the game is now available. And today we also submitted it to Samsung's Galaxy Store for review.

The initial release comes with 14 different languages.

Later this month we'll publish an HTML 5 (WebGL) game based on the same engine. I'm pretty sure that one will go absolutely viral, and when you see it, you'll see immediately why I think so. Stay tuned.

I'm aware of only one other game that "strategygamifies" the problem of a viral pandemic: Ndemic Creations' Plague Inc., which was launched in 2012 with what is now called its "main mode." That "main mode" has the objective of extinguishing humanity by means of a lethal virus. By stark contrast, my game's subtitle is "Heal - Protect - Prevent." Also, the virus in Viral Days isn't lethal. There's a difference like day and night between those two virus games not only in terms of the game objective but also the genre. Plague Inc. is a numbers-centric, abstract game where you see dots on a world map. Viral Days is about people you see--and try to take good care of. It's hands-on because players get to distribute masks, hospitalize or home-quarantine infected people, disperse crowds, and when you impose a lockdown in my game (available once you've reached level 18), you see people running home, just like you can see how infections are happening when an ill person and a healthy person spend too much time close to each other.

Viral Days highlights proximity with a frame that adjusts dynamically. I prototyped that one back in 2014, originally for a completely different purpose, and for a long time I had been looking for a way to put it to use in a game. In the early morning hours of March 19, 2020, I finally found it.

This game has the potential to reach a huge audience--and should have a positive effect on many (especially, but not only, young) people's attitude towards masks and social distancing. Apple disallows COVID-19-themed games, and Google has strict rules concerning metadata containing such keywords as COVID-19, corona(virus), and pandemic. But Viral Days is a generic virus game. In fact, what you see in the game would apply to the Spanish Flu of 1918 as well.

When I started blogging about those App Store antitrust cases in the summer, I said I was about to publish a game app myself. It took a few months longer than I thought then, but by now you know which one I meant. I'm so happy to have created a game that I'd definitely play even if I hadn't made it. And proud to have invented a new strategy game genre: real-time strategy without anything resembling military combat. It's viral real-time strategy.

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NOTE: In the other article I published this weekend, you can read about my Viral Days real-time strategy game for Android and iOS. There are no plans at this point, and I don't anticipate that there will be, to make that game available on subscription services like Apple Arcade. Thus I don't have a conflict of interest when commenting on Pistacchio v. Apple.

About two months ago, class action lawyers brought a case against Apple over its Apple Arcade game subscription service for iOS, alleging that consumers overpaid because Apple didn't allow other game services such as Microsoft xCloud, Google Stadia, Facebook Gaming, and GeForce Now to be offered on the iPhone and the iPad. The consumer plaintiff's name is John Pistacchio.

When the deadline for responding to a complaint is up, a defendant must either file an answer to the complaint or a motion to dismiss the case at this earliest procedural juncture. For example, Google brought a motion to dismiss Epic Games' antitrust complaint over its Google Play terms and policies, while Apple decided to defend itself against Epic's App Store case, though some of Apple's defenses would also be typical arguments in favor of outright dismissal.

The Pistacchio case, however, is not on the same schedule as various other App Store cases pending before Oakland-based Judge Yvonne Gonzalez Rogers in the Northern District of California. And that case is now falling even further behind as Apple elected to ask the court to toss that complaint (this post continues below the document):

20-12-17 Apple Motion to Di... by Florian Mueller

In the Pistacchio case, Apple is represented by Paul Weiss attorneys Karen Dunn and Bill Isaacson, who already counted Apple among their clients while they were with Boies Schiller.

Apple's lawyers say "[Pistacchio] attempts to stake a flag all his own in a little corner of the broader App Store actions by implausibly alleging that Apple’s innovative subscription service, Apple Arcade, is a monopoly." There's no question that the Pistacchio case is an outlier. While other cases such as Pepper v. Apple and Epic Games v. Apple tackle the alleged App Store monopoly (some from a consumer and others from a developer perspective), Pistacchio is narrowly focused on the Apple Arcade gaming service.

Antitrust plaintiffs always seek to define the relevant antitrust market(s) as narrowly--and defendants as broadly--as possible. A narrow definition may be perfectly appropriate. However, implausibly narrow definitions result in dismissal, as the Ninth Circuit held a couple of years ago in Hicks v. PGA Tour. A market definition must be "natural" as opposed to "contorted to meet [a given plaintiff's] litigation needs."

Apple's motion criticizes that the relevant product market according to the Pistacchio complaint (the "iOS Subscription-Based Mobile Gaming Services Market") is not only about a single company (Apple) and a single product (Apple Arcade) but defined "by the way that users pay for it: a subscription fee."

According to Apple, courts don't accept that criterion. Instead, even if one focused only on iOS games, one would have to take into consideration that "the App Store offers offer more than 900,000 third-party mobile games, many of them free" (I just added one such game to the list). Apple argues that anybody could do what Apple Arcade does and offer such games on the App Store, and offer a subscription covering multiple titles. That may not be the business model of the alternative gaming services Pistacchio says Apple prevents from competing, but Apple notes that others can't force Apple to do business with them on their preferred terms. Much less, according to Apple, could a consumer like Pistacchio bring a complaint over a denial of access to what is allegedly an essential facility. That is the second part of Apple's argument for dismissal.

Getting back to the first part, Apple's motion says Pistacchio's proposed market definition is "a gerrymandered market." Gerrymandering is a term that describes an opportunistic definition of an electoral district. On maps, gerrymandered districts are often characterized by a shape that is contiguous, but simply not natural.

What may be seen as another aspect of Apple's allegation of gerrymandering is that the Pistacchio complaint doesn't claim Apple disallowed all other subscription-based gaming services than Apple Arcade. Even Pistacchio acknowledges that some are indeed allowed--and others would be allowed if "the requirement that games must be downloaded directly from the App Store" was met.

Apple's motion also disputes the plausibility of Pistacchio's allegation of overcharging, given that the 4ドル.99 monthly subscription price Pistacchio claims to have paid for Apple Arcade "is exactly in line with, or lower than, that of the other subscription gaming services that entered the market after Apple."

I wouldn't bet money on the Pistacchio complaint surviving this motion to dismiss. It may simply have been an overly ambitious and somewhat premature case. Whatever happens in that particular case, subscription-based gaming services are a topic worth watching. For instance, Microsoft will offer its xCloud streaming service on iOS--not in the form of a native iOS app (for the time being), but a web app (HTML5). There's certainly a potential for conflict between Apple and the providers of such services. It appears that Google allows certain business models and technical approaches on Android that wouldn't pass Apple's app review. But it may take a gaming service provider to complain. A consumer class action might be the wrong vehicle.

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Today Lodsys has amended its complaint against mobile app developers and modified the list of defendants, leaving out one of the seven developers sued on May 31 (Vietnamese company Wulven Games) but adding five famous games companies:

• Rovio is accused of infringing at least one of Lodsys's patents with Angry Birds for iOS and Angry Birds for Android -- here's the related paragraph (click to enlarge):

• Electronic Arts: The Sims 3 for iPhone

• Atari: Atari's Greatest Hits for iPhone and Atari's Greatest Hits for iPad

• Square Enix: Big Hit Baseball for iPhone and Big Hit Baseball for iPad

• Take-Two Interactive: 2K Sports NHL 2K11 for iPhone

The number of defendants in this lawsuit has now increased from 7 to 11 (7 original defendants, 1 left out, 5 new ones added). Here's the header of the amended complaint:

I have also uploaded the complaint to Scribd.

This amended complaint shows several things:

• Lodsys is not afraid of suing deep-pocketed app developers. I'm not surprised, given that Lodsys has three other lawsuits going, all of them against big companies including the likes of HP, Brother, adidas, Best Buy, The New York Times Company, etc.

• Lodsys continues to go after Android apps as well. In the original lawsuit against seven app developers, one of the games was available for iOS and Android (Labyrinth). That one is still part of the list, but now Angry Birds, a much more prominent cross-platform game, has joined it. Recently, Lodsys sent a number of assertion letters to Android developers, and Android community websites increasingly report on the problem (as I mentioned in this blog post on how app developers can cost-efficiently deal with the situation). Google's silence and inactivity about this issue makes it likely that Lodsys will sue more Android developers if they don't pay.

• Lodsys is still not impressed by Apple's assertion that its own license to Lodsys's patents extends to its app developers. I also pointed out that Apple's "exhaustion" theory is not necessarily accurate. Also, Lodsys may be able to capitalize on contractual commitments that might preclude Apple and Google from challenging Lodsys's patents and the related infringement allegations.

With today's amended complaint, Lodsys is currently suing a total of 37 defendants, and there may be more to come.

In this context I'd like to recommend an article written by a staff attorney of the Electronic Frontier Foundation in light of the fact that there are app developers who have removed their products from the U.S. market due to the rampant patent troll problem (a fact that was reported on by The Guardian).

If you'd like to be updated on the smartphone patent disputes and other intellectual property matters I cover, please subscribe to my RSS feed (in the right-hand column) and/or follow me on Twitter @FOSSpatents.

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Quizcover game app (by Quizista GmbH) [U.S. trademark application data on Justia.com]