20-09-15 Apple's Opposition To Epic Games' Motion For Preliminary Injunction

Case 4:20-cv-05640-YGR Document 73 Filed 09/15/20 Page 1 of 37
1 THEODORE J. BOUTROUS JR., E. JOSHUA ROSENKRANZ

SBN 132099 (N.Y. Bar No. 2224889; pro hac vice pending)
2 tboutrous@gibsondunn.com jrosenkranz@orrick.com
RICHARD J. DOREN, SBN 124666 ORRICK, HERRINGTON & SUTCLIFFE LLP
3 rdoren@gibsondunn.com 51 West 52nd Street
DANIEL G. SWANSON, SBN 116556 New York, NY 10019-6142
4 dswanson@gibsondunn.com Telephone: 212.506.5000
JAY P. SRINIVASAN, SBN 181471 Facsimile: 212.506.5151
5 jsrinivasan@gibsondunn.com
GIBSON, DUNN & CRUTCHER LLP WILLIAM F. STUTE
6 333 South Grand Avenue (D.C. Bar No. 1032093; pro hac vice pending)
Los Angeles, CA 90071-3197 wstute@orrick.com
7 Telephone: 213.229.7000 ORRICK, HERRINGTON & SUTCLIFFE LLP
Facsimile: 213.229.7520 1152 15th Street, N.W.
8 Washington, DC 20005-1706
MARK A. PERRY, SBN 212532 Telephone: 202.339.8400
9 mperry@gibsondunn.com Facsimile: 202.339.8500
CYNTHIA E. RICHMAN (D.C. Bar
10 No. 492089; pro hac vice) Attorneys for Defendant APPLE INC.
crichman@gibsondunn.com
11 GIBSON, DUNN & CRUTCHER LLP
1050 Connecticut Avenue, N.W.
12 Washington, DC 20036-5306
Telephone: 202.955.8500
13 Facsimile: 202.467.0539
14 VERONICA S. LEWIS (Texas Bar

No. 24000092; pro hac vice)
15 vlewis@gibsondunn.com
GIBSON, DUNN & CRUTCHER LLP
16 2100 McKinney Avenue, Suite 1100
Dallas, TX 75201
17 Telephone: 214.698.3100
Facsimile: 214.571.2900
18
UNITED STATES DISTRICT COURT
19 NORTHERN DISTRICT OF CALIFORNIA
OAKLAND DIVISION
20
EPIC GAMES, INC., Case No. 4:20-cv-05640-YGR
21
Plaintiff, DEFENDANT APPLE INC.’S
22 OPPOSITION TO EPIC GAMES,
v. INC.’S MOTION FOR A
23 PRELIMINARY INJUNCTION
APPLE INC.,
24 Date: September 28, 2020 at 9:30 a.m. (via
Defendant. Zoom Platform)
25
Courtroom: 1, 4th Floor
26
Judge: Hon. Yvonne Gonzalez Rogers
27
28
APPLE’S OPPOSITION TO EPIC’S PI MOTION CASE NO. 4:20-CV-05640-YGR

1 TABLE OF CONTENTS
2 Page
3 TABLE OF AUTHORITIES .......................................................................................................... ii
4 I. INTRODUCTION .............................................................................................................. 1
5 II. STATEMENT OF FACTS ................................................................................................. 3
A. Apple’s Revolutionary iPhone Ecosystem. ............................................................. 3
6
B. Apple’s Developer License Agreement And App Store Guidelines Ensure
7 Reliability, Safety, Security, And Privacy For Users Of iPhone
Applications. ........................................................................................................... 7
8
C. Epic Agrees To Apple’s iPhone Developer License And App Store
9 Guidelines. .............................................................................................................. 9
10 D. Epic Intentionally Breaches Its Agreements With Apple, Is Expelled From
The App Store, And Launches A Litigation And Public-Relations
11 Campaign Against Apple. ..................................................................................... 11
12 E. The Court Denies In Part And Grants In Part Epic’s Request For A TRO,
And Epic Continues To Breach Its Agreements. .................................................. 13
13
III. LEGAL STANDARD ....................................................................................................... 14
14 IV. ARGUMENT .................................................................................................................... 14
15 A. Epic Will Not Succeed On The Merits Of Its Antitrust Claims............................ 15
1. Epic’s monopoly maintenance claim will not succeed. ............................ 15
16
a. Epic’s proposed market definition is untenable. ........................... 15
17
b. Epic identifies no unlawful monopoly maintenance. .................... 17
18 2. Epic’s tying claims will fail because IAP is not a separate market or
19 product....................................................................................................... 18
3. Apple’s iPhone business model is procompetitive.................................... 21
20
B. Epic Will Not Suffer Irreparable Harm Because Its Claimed Harm Is
21 Entirely Self-Inflicted............................................................................................ 23
22 C. The Balance Of Equities Tips Sharply In Apple’s Favor. .................................... 27
D. An Injunction Would Harm The Public Interest. .................................................. 29
23
V. CONCLUSION ................................................................................................................. 30
24
25
26
27
28
APPLE’S OPPOSITION TO EPIC’S PI MOTION -i- CASE NO. 4:20-CV-05640-YGR

1 TABLE OF AUTHORITIES
2 Page(s)
3 Cases
4
Acquaire v. Canada Dry Bottling Co.,
5 24 F.3d 401 (2d Cir. 1994) ................................................................................................ 25, 26
6 Aerotec Int’l, Inc. v. Honeywell Int’l, Inc.,

836 F.3d 1171 (9th Cir. 2016)................................................................................................. 19
7
Al Otro Lado v. Wolf,
8 952 F.3d 999 (9th Cir. 2020)......................................................................................... 2, 24, 26
9 Apple Inc. v. Pepper,
10 139 S. Ct. 1514 (2019) ............................................................................................................ 15
11 Apple Inc. v. Psystar Corp.,

586 F. Supp. 2d 1190 (N.D. Cal. 2008) .................................................................................. 16
12
Brooke Grp., Ltd. v. Brown & Williamson Tobacco Corp.,
13 509 U.S. 209 (1993) ................................................................................................................ 22
14 Chavez v. Whirlpool Corp.,
15 93 Cal. App. 4th 363 (2001).................................................................................................... 23
16 Eastman Kodak Co. v. Image Tech. Servs., Inc.,

504 U.S. 451 (1992) ................................................................................................................ 16
17
Frank B. Hall & Co., Inc. v. Alexander & Alexander, Inc.,
18 974 F.2d 1020 (8th Cir. 1992)................................................................................................. 29
19 FTC v. Qualcomm Inc.,
969 F.3d 974 (9th Cir. 2020)............................................................................................. 15, 23
20
21 Garcia v. Google, Inc.,

786 F.3d 733 (9th Cir. 2015)............................................................................................. 14, 15
22
Germon v. Times Mirror Co.,
23 520 F.2d 786 (9th Cir. 1975)................................................................................................... 26
24 Goldberg v. Barreca,
No. 2:17-CV-2106 JCM (VCF), 2017 WL 3671292 (D. Nev. Aug. 24, 2017) ...................... 29
25
Hicks v. PGA Tour, Inc.,
26
897 F.3d 1109 (9th Cir. 2018)........................................................................................... 16, 17
27
Image Tech. Servs., Inc. v. Eastman Kodak Co.,
28 125 F.3d 1195 (9th Cir. 1997)................................................................................................. 21
APPLE’S OPPOSITION TO EPIC’S PI MOTION - ii - CASE NO. 4:20-CV-05640-YGR

1 It’s My Party, Inc. v. Live Nation, Inc.,

811 F.3d 676 (4th Cir. 2016)................................................................................................... 19
2
Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
3
466 U.S. 2 (1984) .............................................................................................................. 17, 20
4
Memorex Corp. v. Int’l Bus. Mach. Corp.,
5 555 F.2d 1379 (9th Cir. 1977)................................................................................................. 25
6 Milsen Co. v. Southland Corp.,

454 F.2d 363 (7th Cir. 1971)................................................................................................... 26
7
Mozart Co. v. Mercedes-Benz of North America, Inc.,
8 833 F.2d 1342 (9th Cir. 1987)................................................................................................. 21
9
Newcal Indus., Ind. v. Ikon Office Sols.,
10 513 F.3d 1038 (9th Cir. 2008)................................................................................................. 16
11 Ohio v. Am. Express Co.,

138 S. Ct. 2274 (2018) ................................................................................................ 15, 20, 22
12
Omega Envtl., Inc. v. Gilbarco, Inc.,
13 127 F.3d 1157 (9th Cir. 1997)................................................................................................. 18
14
Pac. Bell Tel. Co. v. LinkLine Commc’ns, Inc.,
15 555 U.S. 438 (2009) ................................................................................................................ 23
16 Pac. Radiation Oncology, LLC v. Queen’s Med. Ctr.,

810 F.3d 631 (9th Cir. 2015)................................................................................................... 18
17
Paladin Assocs., Inc. v. Montana Power Co.,
18 328 F.3d 1145 (9th Cir. 2003)................................................................................................. 20
19 Perma Life Mufflers, Inc. v. Int’l Parts Corp.,
20 392 U.S. 134 (1968) ................................................................................................................ 25
21 Queen City Pizza, Inc. v. Domino’s Pizza, Inc.,

124 F.3d 430 (3d Cir. 1997) .................................................................................................... 17
22
Rick-Mik Enters., Inc. v. Equilon Enters. LLC,
23 532 F.3d 963 (9th Cir. 2008)................................................................................................... 20
24 S. Glazer’s Distribs. of Ohio, LLC v. Great Lakes Brewing Co.,
860 F.3d 844 (6th Cir. 2017)................................................................................................... 29
25
26 Salt Lake Trib. Publ’g Co. v. AT&T Corp.,

320 F.3d 1081 (10th Cir. 2003)............................................................................................... 24
27
Stanley v. Univ. of S. Cal.,
28 13 F.3d 1313 (9th Cir. 1994)................................................................................................... 15
APPLE’S OPPOSITION TO EPIC’S PI MOTION - iii - CASE NO. 4:20-CV-05640-YGR

1 United States v. E.I. du Pont de Nemours & Co.,

351 U.S. 377 (1956) ................................................................................................................ 16
2
United States v. Grinnell Corp.,
3
384 U.S. 563 (1966) ................................................................................................................ 15
4
United States v. Microsoft Corp.,
5 253 F.3d 34 (D.C. Cir. 2001) ............................................................................................ 18, 21
6 Universal Analytics, Inc. v. MacNeal-Schwendler Corp.,

914 F.2d 1256 (9th Cir. 1990)................................................................................................. 21
7
Will v. Comprehensive Accounting Corp.,
8 776 F.2d 665 (7th Cir 1985).................................................................................................... 20
9
Winter v. Nat. Res. Def. Council, Inc.,
10 555 U.S. 7 (2008) .................................................................................................................... 14
11 Other Authorities
12 10 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 1752b (3d ed. 2011) .................... 19
13 11A Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure
§ 2948.1 (3d ed. 2020) ............................................................................................................ 24
14
15 ABA Section of Antitrust Law, Antitrust Law Developments (8th ed. 2017).............................. 17
16 Apple, App Store: Principles and Practices, https://tinyurl.com/y4m7tdp5 (last

visited Sept. 14, 2020)....................................................................................................... 5, 6, 8
17
Apple, Choosing a Business Model, https://developer.apple.com/app-
18 store/business-models/ (last visited Sept. 15, 2020) ............................................................... 19
19 AppleInsider, Steve Jobs confirms native iPhone SDK by February,
https://tinyurl.com/y3m7a45l (last visited Sept. 14, 2020) ....................................................... 4
20
21 Crystal Mills, ‘Fortnite’ Popularity Fades As ‘Call of Duty’ Closes Gap, Survey
Says, Yahoo Finance (Apr. 8, 2020), https://tinyurl.com/y3k45f3u (last visited
22 Sept. 14, 2020) ........................................................................................................................ 11
23 David S. Evans & Richard Schmalensee, Matchmakers: The New Economics of

Multisided Platforms (2016) ................................................................................................... 20
24
End User License Agreement for Unreal Engine: https://tinyurl.com/y5hbagot (last
25 visited Sept. 14, 2020)............................................................................................................. 13
26
Epic Games, FAQs: Where Can I Download Battle Royale?,
27 https://tinyurl.com/y2gzd8rk (last visited Sept. 14, 2020) ...................................................... 13
28 Frequently Asked Questions, https://www.unrealengine.com/en-US/faq ...................................... 6
APPLE’S OPPOSITION TO EPIC’S PI MOTION - iv - CASE NO. 4:20-CV-05640-YGR

1 Google Trends, https://tinyurl.com/yxrkj4td (last visited Sept. 14, 2020) ................................... 11

2 Herbert Hovenkamp et al., IP and Antitrust: An Analysis of Antitrust Principles
Applied to Intellectual Property Law § 13.03 (3rd ed., 2016 Supp. 2019) ............................ 18
3
4 IDC, Smartphone Market Share, https://www.idc.com/promo/smartphone-market-

share/vendor (last visited Sept. 15, 2020) ................................................................................. 4
5
Jonathan Borck, Juliette Caminade & Markus von Wartburg, Apple’s App Store
6 and Other Digital Marketplaces: A Comparison of Commission Rates,
Analysis Group (July 22, 2020), https://tinyurl.com/yy27qoh3 (last visited
7 Sept. 14, 2020) .......................................................................................................................... 6
8 Randall Williams, Fortnite’s Slowdown Has Epic Games Battling to Spark New
9 Growth, Bloomberg (Aug. 20, 2019), https://tinyurl.com/yxh4xgz2 (last visited
Sept. 14, 2020) ........................................................................................................................ 11
10
Statement of Tim Cook, Apple Inc., before the U.S. House of Representatives
11 Judiciary Committee, Subcommittee on Antitrust, Commercial and
Administrative Law (July 29, 2020), https://tinyurl.com/y4cchmzr (last visited
12 Sept. 14, 2020) .................................................................................................................... 3, 22
13
Unity Software, Inc., Registration Statement Under the Securities Act of 1933
14 (Form S-1) (Aug. 24, 2020), https://tinyurl.com/unitys1 (last visited Sept. 15,
2020) ....................................................................................................................................... 10
15
Welcome to Epic Games, https://tinyurl.com/y8pkoovn (last visited Sept. 14,
16 2020) ......................................................................................................................................... 6
17
18
19
20
21
22
23
24
25
26
27
28
APPLE’S OPPOSITION TO EPIC’S PI MOTION -v- CASE NO. 4:20-CV-05640-YGR

1 I. INTRODUCTION
2 Since Fortnite debuted on the iPhone in 2018, Apple has provided Epic with an exceptional
3 array of benefits. Apple has licensed to Epic its full suite of developer tools, which Epic has used
4 to create more than 200 Apple-reviewed modifications; at Epic’s request, Apple has pushed more
5 than 140 unique updates to end users, and has made systemic changes to enhance game play in
6 Fortnite. Apple has provided a tremendous amount of marketing support by promoting Fortnite in
7 the App Store, featuring Fortnite in keynote events, sending over 500 million marketing
8 communications about Fortnite to end users, and even placing Fortnite billboards in Times Square
9 at Apple’s expense. Perhaps most significantly, Apple has given Epic access to its one billion
10 iPhone customers, and facilitated transactions with them using the safe and secure App Store. More
11 than 130 million people have downloaded Fortnite on the iPhone, earning Epic more than $550
12 million through iOS alone. For all of this, Epic has paid Apple just $99 each year for a developer
13 license, plus a 30% commission on digital purchases by end users.
14 Epic now wants to play by different rules—it wants to keep enjoying these extensive, and
15 expensive, benefits of Apple’s ecosystem, including continued access to Apple’s iPhone
16 customers—for free. To avoid paying Apple, Epic smuggled into Fortnite a “hotfix” that bypassed
17 the App Store’s payment functionality, in willful breach of its contractual promises that prohibit
18 cheating the system. Simultaneously, Epic’s CEO Tim Sweeney declared war against Apple “on a
19 multitude of fronts—creative, technical, business, and legal.” Decl. of Philip W. Schiller (Schiller
20 Decl.), Ex. G at 2. Apple reasonably responded by exercising its absolute right to remove Fortnite
21 from the App Store, and terminating the developer privileges of Epic and its affiliates, unless and
22 until Epic comes back into compliance with Apple’s policies. Epic refuses to do so, and instead
23 asks this Court to issue an extraordinary order blue-penciling the parties’ agreements so that Epic
24 can use Apple’s services without paying any commissions.
25 Epic’s motion should be denied because it has not come close to meeting any of the four
26 traditional equitable factors necessary to justify a preliminary injunction:
27 Apple is no monopolist, and Epic is not likely to succeed on the merits of its argument that
28 the integrated iPhone business model violates the antitrust laws. Indeed, no court has ever accepted
APPLE’S OPPOSITION TO EPIC’S PI MOTION -1- CASE NO. 4:20-CV-05640-YGR

1 a claim remotely like this one, and the sheer novelty of Epic’s position precludes preliminary
2 injunctive relief. The App Store connects app developers with iPhone users for commercial
3 transactions. Apple charges developers, in addition to a nominal annual fee, a commission on paid
4 apps and in-app digital purchases by end users. This approach and commission structure, which is
5 common in the industry, provides Apple with a financial return on its significant investments in
6 creating, safeguarding, and maintaining the iPhone ecosystem—which has fueled an exponential
7 increase in output of mobile devices and apps, dramatically benefited users and developers, and
8 significantly increased consumer choice. Simply put, the iPhone business model is decidedly
9 procompetitive. Accordingly, Epic’s theories of “monopoly maintenance” and “tying” will fail on
10 the merits.
11 Epic also cannot demonstrate any irreparable injury, which is reason enough to deny its
12 preliminary injunction motion. Epic started a fire, and poured gasoline on it, and now asks this
13 Court for emergency assistance in putting it out, even though Epic can do so itself in an instant by
14 simply adhering to the contractual terms that have profitably governed its relationship with Apple
15 for years. This Court was right when it previously ruled that “‘self-inflicted wounds are not
16 irreparable injury.’” Dkt. 48 at 5 (quoting Al Otro Lado v. Wolf, 952 F.3d 999, 1008 (9th Cir. 2020)).
17 Epic created the current situation by triggering its “hotfix,” knowing that Apple would invoke its
18 contractual rights to protect iPhone customers. Apple is legally and equitably entitled to sever ties
19 with a party that persists in breaking the rules, and that party’s affiliates; accordingly, Apple
20 removed Fortnite from the App Store and expelled Epic from the developer program. Apple has
21 taken this approach thousands of times with other developers and their affiliates. There is no reason
22 for this Court to issue extraordinary relief when Epic itself can avoid any further harm—to itself,
23 Fortnite players, or third parties—with a keystroke, and “maintain its agreements with Apple … as
24 this litigation continues.” Id.
25 The balance of hardships favors Apple. Epic’s “hotfix” was not just an open breach of
26 contract but a fundamental breach of trust. Apple promises its customers that the App Store will be
27 a safe and trustworthy place for customers to discover and download apps. By inserting secret and
28 unreviewed functionality into an app, Epic threatens the relationship between Apple and iPhone

1 customers. Allowing Epic to continue offering Fortnite and Unreal Engine without complying with
2 Apple’s requirements would put at risk the privacy and security of iPhone customers, as well as the
3 stability and integrity of the iPhone ecosystem.
4 Finally, the public interest warrants denial of injunctive relief because Epic is responsible
5 for harming the very community it purports to be protecting. If Epic were really concerned about
6 preserving iPhone users’ access to Fortnite, or developers’ access to Unreal Engine, it would
7 deactivate the “hotfix” and comply with Apple’s policies pending resolution of its claims. Instead,
8 Epic is holding its own customers hostage to gain leverage in a business dispute. In contrast, Apple
9 is protecting a billion iPhone users threatened by Epic’s actions (and the requested injunction). This
10 Court should not sanction such unauthorized and dangerous activity, or strip Apple of the ability to
11 protect its users against such attacks, particularly given the very early stage of this litigation.
12 In sum, Epic’s unprecedented and unsupported antitrust claims are doomed to fail on the
13 merits, and thus Epic has not demonstrated likelihood of legal success; Epic’s asserted harm is the
14 self-inflicted and self-fixable result of its own cheating and breach and thus not irreparable; and the
15 balance of hardships and public interest favor Apple because the relief requested by Epic risks
16 harming the iPhone ecosystem and around a billion iPhone users around the world. The detailed
17 fact and expert declarations submitted by Apple, in view of binding and persuasive decisional
18 authority, overwhelm Epic’s speculative and ultimately baseless submission. Accordingly, Epic’s
19 motion for a preliminary injunction should be denied.
20 II. STATEMENT OF FACTS

21 A. Apple’s Revolutionary iPhone Ecosystem.
22 It is hard to remember what the digital marketplace looked like in 2006. Mobile phones and
23 portable music devices were common, but they had very few features. Laptops could do more. But
24 if you wanted to install a game or other software you had to either visit a physical retail store and
25 pay high markups, or take your chances on the Internet where it was buyer beware. 1 See Schiller
26 Decl. ¶ 3.
27 1
Statement of Tim Cook, Apple Inc., before the U.S. House of Representatives Judiciary
28 Committee, Subcommittee on Antitrust, Commercial and Administrative Law (July 29, 2020),
https://tinyurl.com/y4cchmzr (last visited Sept. 14, 2020) (Cook July 2020 Statement).
1 All that changed in 2007, when Apple introduced the iPhone and set off a revolution in
2 mobile devices. 2 Apple thought differently. The iPhone combined cutting-edge design with an
3 integrated system of hardware and software that offered unparalleled performance and ease of use.
4 See Schiller Decl. ¶ 8. It included a powerful custom-made operating system that was designed
5 from the ground up to exploit the unique features and functionality of the iPhone. The iPhone’s
6 operating system (iOS) is deeply integrated with Apple’s hardware, and that engineering success
7 enables a greater ability to innovate both for Apple and third-party developers. See id. Apple’s
8 approach created and nurtured an entire ecosystem, which now supports an enormous community
9 of 27 million app developers and connects them with around a billion users around the world. Id.
10 ¶¶ 12, 36, 45.
11 Thirteen years later, the iPhone represents just one of many smartphone choices available
12 to consumers. Samsung, LG, Google, Motorola, and a number of others compete in a crowded
13 marketplace. That fierce competition is reflected in Apple’s share of the global market for
14 smartphone sales, which IDC recently pegged at 13.3%. 3 And the choices are only growing.
15 The first iPhone offered a suite of Apple applications, see Expert Decl. of Richard
16 Schmalensee (Schmalensee Decl.) ¶ 23, while the browser was initially the gateway for third-party
17 developers. The immediate success of the iPhone, and the power of its computing platform, led to
18 a clamoring in the developer community for the ability to create native applications. As Steve Jobs
19 explained, Apple ultimately made the decision to open the platform, but it did so deliberately and
20 carefully with the interests of users fully in mind. “[P]rovid[ing] an advanced and open platform to
21 developers while at the same time protect[ing] iPhone users from viruses, malware, privacy attacks,
22 etc. … is no easy task.” 4
23 2
Because Epic’s Complaint “refers to the operating system on both [the iPhone and iPad] as
24 ‘iOS,’” and alleges that “[t]here are no differences between iOS and iPadOS that are relevant to the
allegations herein,” Dkt. 1 ¶ 39, n.1, references here to “iPhone” also apply to the iPad.
3
25 IDC, Smartphone Market Share, https://www.idc.com/promo/smartphone-market-
share/vendor (last visited Sept. 14, 2020).
26 4
AppleInsider, Steve Jobs confirms native iPhone SDK by February,
https://tinyurl.com/y3m7a45l (last visited Sept. 14, 2020); see also id. (“Some claim that viruses
27
and malware are not a problem on mobile phones, this is simply not true. There have been serious
28 viruses on other mobile phones already, including some that silently spread from phone to phone
over the cell network. As our phones become more powerful, these malicious programs will become
1 There were three prongs from the beginning: Build, Test, Distribute. Apple first had to
2 provide the fundamental building blocks for the developer community. It had to create the tools
3 and the software that would allow developers to build native applications that could leverage the
4 power and capability of the iPhone. See Schiller Decl. ¶¶ 16-18. Apple also wanted the ability to
5 test the third-party applications before they went live on a user’s device. See id. ¶ 19. It wanted to
6 ensure that the tools, software, and access it provided to developers were not misused in a way that
7 would harm users or their devices. See id. ¶ 20. And it wanted to ensure that the applications were
8 appropriate for users and devices. See id. ¶¶ 23-26. Rather than recreating the Internet, Apple opted
9 instead to create a safe and trusted place for its iPhone customers to discover and download apps,
10 confident that they will work seamlessly and securely with the tap of a finger. 5 See Schiller Decl.
11 ¶ 20. Starting with just 500 apps in 2008, the App Store now has 1.8 million of breathtaking variety
12 and utility, every one of which has passed through Apple’s quality control and safety checks.
13 Id. ¶ 3.
14 For developers, the App Store is now a means to reach a customer base of a billion iPhone
15 users. Id. ¶¶ 5, 36, 45. But it is way more than that. In the interest of stoking more creativity, and
16 to bring more apps to its users, Apple supports developers in a variety of ways, investing billions
17 in tools, software, and technology to make it as easy as possible for developers to bring their ideas
18 to life on the iPhone. Id. ¶¶ 10-14; see also Expert Decl. of Lorin Hitt (Hitt Decl.) ¶ 66. For
19 example, developers have access to 150,000 iOS Application Programming Interfaces (APIs),
20 technical tools that simplify and accelerate the development process, across Apple’s iOS. Schiller
21 Decl. ¶ 17; Decl. of Mike Schmid (Schmid Decl.) ¶ 3. This is an exponential increase over the
22 number of APIs available to developers in the beginning. Schiller Decl. ¶ 17. These tools,
23 technology, and software are protected by copyrights, patents, and other intellectual property (IP)
24 protections and subject to license agreements for their use. Id. ¶¶ 10-12, 16-18. Apple makes them
25 available to developers who are willing to contribute to the healthy, functional ecosystem Apple
26
more dangerous. And since the iPhone is the most advanced phone ever, it will be a highly visible
27
target.”).
5
28 Apple, App Store: Principles and Practices, https://tinyurl.com/y4m7tdp5 (last visited Sept. 14,
2020).
1 created. See id.
2 Apple has adopted a business model for the App Store that enables it to offer developers
3 access to its technology platform, tools, software and other resources (including marketing support)
4 at a very low cost. Apple has invested billions of dollars in making the ecosystem thrive. Id. ¶ 5.
5 Apple charges a $99-a-year fee to developers interested in distributing apps. Id. ¶ 4. And for
6 developers not interested in app distribution—be they job-seekers building a new skill or the
7 intellectually curious—Apple makes its developer tools and resources available for free. Id. ¶ 11.
8 Developers pay Apple nothing further for access to the App Store unless and until developers bill
9 and collect funds from users who engage in digital transactions. Id. ¶¶ 6-7.
10 The main mechanism by which developers pay Apple is through its in-app purchase (IAP)
11 technology. Id. ¶¶ 33, 39. Apple’s IAP is hardly unique; Google’s Play Store, the Amazon
12 Appstore, the Microsoft Store, and many video game digital marketplaces, such as Xbox,
13 PlayStation, Nintendo, and Steam, all have similar fees and requirements to use the marketplace’s
14 official in-app purchase functionality. 6 In fact, even Epic’s own app marketplace charges users and
15 developers a commission to use Epic’s services. 7 Consistent with the practices of other mobile
16 platforms, Apple retains at most a 30% commission on sales made for digital products that are used
17 within the iPhone ecosystem (including apps and in-app purchases). 8 Schiller Decl. ¶ 7.
18 Apple has used this model from the beginning of the App Store, while adding features to
19 reduce the costs for developers. It also reduced the commission for some developers. Schiller Decl.
20 ¶ 7. More than 80% of the apps in the App Store pay no commission to Apple. Schiller Decl. ¶ 7.
21 And because of Apple’s business model, consumers benefit by accessing an enormous amount of
22 content for free. See Schmalensee Decl. ¶¶ 25-27, 30.
23
6
24 Jonathan Borck, Juliette Caminade & Markus von Wartburg, Apple’s App Store and Other
Digital Marketplaces: A Comparison of Commission Rates, Analysis Group, at 5 (July 22, 2020),
25 https://tinyurl.com/yy27qoh3 (last visited Sept. 14, 2020).
7
See Welcome to Epic Games, https://tinyurl.com/y8pkoovn (last visited Sept.
26 14, 2020) (12% revenue share on Epic Games store); Frequently Asked Questions,
https://www.unrealengine.com/en-US/faq (standard 5% royalty on games built with Unreal
27
Engine).
8
2020).
1 B. Apple’s Developer License Agreement And App Store Guidelines Ensure

Reliability, Safety, Security, And Privacy For Users Of iPhone Applications.
2
No ecosystem thrives for long without rules. That is why Apple insists on securing from
3
app developers contractual commitments to abide by clear requirements and policies in return for
4
the benefits of participating in the App Store and the Developer Program. Any developer who wants
5
permission to use certain Apple tools, technology, and software has to sign the Apple Developer
6
Program License Agreement (License Agreement). Schiller Decl. ¶¶ 10-12; id. at Ex. B. But that is
7
not all they agree to. They also agree in the App Store Review Guidelines (Guidelines) that certain
8
breaches—like cheating—represent such a grave threat to the ecosystem that Apple must be able
9
to respond with decisive action. The very first section of the Guidelines declares:
10
[If] you attempt to cheat the system (for example, by trying to trick
11 the review process, steal user data, copy another developer’s work,
manipulate ratings or App Store discovery) your apps will be
12 removed from the store and you will be expelled from the Developer
Program.
13
Id. at Ex. C at 2 (emphasis added). This contractual right has teeth because Apple’s developer
14
contracts are at-will: Apple may terminate them at any time. Id. ¶¶ 46-48, 56.
15
Among other requirements, the License Agreement prohibits developers from using
16
Apple’s software to interfere with its security protocols and operation, and bars developers from
17
distributing applications that have circumvented Apple’s review process. Id. ¶¶ 10-14, 20-22; id. at
18
Ex. B ¶ 3.2(e), (f), (g). It forbids developers from making changes to their apps without
19
resubmitting the revised app for review, a safeguard that ensures developers have not made changes
20
to the payment system or bypassed security features of the iPhone or privacy protections. Id. at Ex.
21
B ¶¶ 3.3.2, 3.3.3. And it expressly says that violations will result in termination of “all rights and
22
licenses granted by Apple hereunder.” Id. at Ex. B ¶ 11.2. “Upon any termination or, … suspension,
23
all rights and licenses granted to [a developer] by Apple will cease, including [the developer’s]
24
right to access the [Apple Developer web pages].” Id. at Ex. A § 10; id. ¶ 47. Apple has built its
25
ecosystem to provide apps and thus only terminates a developer’s account in the most egregious
26
situations where (as here) a developer takes steps that put the security and operation of the
27
ecosystem at risk. Id. ¶¶ 49-53.
28
Apple needs that power of expulsion to ensure safety, security, privacy, and reliability for
1 the consumers of this vast ecosystem. Id. ¶¶ 46, 52. If any developer could sneak in changes to its
2 apps without “expressly call[ing] attention to the new functionality,” the consequence could be
3 catastrophic. Expert Decl. of Mark Graff (Graff Decl.) ¶ 22. “The extraordinary volume of app
4 submissions, combined with the innate difficulty of finding security issues through mere
5 examination of the software, would make iOS applications significantly less safe—to the detriment
6 of Apple customers, the developers, and all those of us who live in a world with a billion or so
7 active iPhones.” Id. Just since 2017, Apple has terminated many, many developer accounts for
8 violating the Guidelines: Apple has terminated over 75,000 unique accounts for introducing new
9 features without going through App Review; over 2,000 accounts for introducing a non-IAP
10 payment method; and over 60,000 accounts for introducing hidden features or obfuscating code
11 (for example, by installing executable code). Schiller Decl. ¶ 53.
12 Apple also needs the ability to take decisive action not just against the particular account in
13 which a developer breaks the rules, but also against other accounts controlled by that developer or
14 its affiliates. When “a developer … engage[d] in deceptive acts on one account” is “terminated,” it
15 can easily “transfer its apps and redirect its activities to another account.” Id. ¶ 56. Apple has to be
16 able to protect itself—and its users—from that sort of shell game. That is why Apple’s contracts
17 permit it to terminate its agreements with developers. Id. at Ex. B ¶ 11.2, Ex. A ¶ 10. That is why
18 “Apple maintains the express right under both the Developer Agreement and License Agreement
19 to terminate with any developer at any time, with or without cause.” Id. And that is why Apple has
20 a longstanding practice of removing all affiliated developer accounts when a developer attempts to
21 cheat or conceal, thereby terminating a breaching developer’s Developer Program membership
22 across all entities with similar ownership. Id. ¶¶ 53, 54-56. Apple does not wait to be fooled a
23 second time before terminating an affiliate for the bad deeds of its principals. Id. ¶¶ 55-56.
24 iPhone users rightfully expect that Apple will ensure apps work as they should and are free
25 from malware, that they protect user privacy, and that pornography apps and illegal real-money
26 gambling apps are prohibited. 9 See id. ¶ 24. “The need for vigilance against malware and other
27
9
2020).
1 security attacks is particularly acute on mobile devices like the iPhone,” as customers “tend to carry
2 large amounts of personal information on their iPhones.” Id.; see also id. ¶ 25. The contractual
3 standards also ensure compatibility and protect against malfunctions or crashes, not just of the app,
4 but also of the device itself. Id. ¶¶ 20, 49, 52. The App Store is the world’s most trusted marketplace
5 for apps precisely because of the standards and safeguards put in place—and the mechanisms Apple
6 has developed to enforce them. Id. ¶ 52; id. at Ex. E at 3; see also Graff Decl. ¶¶ 5, 20.
7 C. Epic Agrees To Apple’s iPhone Developer License And App Store Guidelines.
8 Epic is a game developer for a number of different platforms. See, e.g., Hitt Decl. ¶ 20;
9 Schiller Decl., Ex. E at 2 (“Epic has many ways to reach consumers, including through Android
10 stores, PC-based platforms, consoles (Xbox, Nintendo, Play Station) and its very own app
11 marketplace.”). It has long developed games for the iPhone. Schiller Decl. ¶ 57. In the past, Epic
12 not only abided by but succeeded under Apple’s rules, using Apple’s proprietary tools, software,
13 and services to bring its games and other apps to life on the iPhone. Id. ¶¶ 57, 69, 77. The Epic
14 application that prompted this controversy is Fortnite, an online video game. The game debuted in
15 July 2017 on a number of platforms, but not on the iPhone. Hitt Decl. ¶¶ 21-22. When Epic finally
16 brought the game to the iPhone in March 2018, Fortnite was already a runaway success, with more
17 than 45 million active players. Id. Since then, the game has continued to grow in popularity,
18 although the iPhone has never been essential to its success. Epic has disclosed that only 10% of
19 Fortnite consumers play regularly on the iPhone. Sweeney Decl., Dkt. 65 ¶ 3. “Epic has repeatedly
20 told [Apple] that … Apple is the ‘smallest piece of the pie’” when it comes to revenue. Schmid
21 Decl. ¶ 18; see also Hitt Decl. ¶ 51. With respect to revenues, all competing platforms besides
22 Google’s Android have a higher Average Revenue Per Daily Active User than does the iPhone,
23 with some platforms—like Xbox and PlayStation—a full 70% or 40% higher than the iPhone,
24 respectively. Schmid Decl. ¶ 18.
25 Epic also offers Unreal Engine, a graphics engine available on many platforms, including
26 PlayStation, Xbox, Nintendo Switch, PC, Mac, and the iPhone, that provides a suite of tools that
27 developers can license to generate graphics for apps across a number of platforms, just one of which
28 is the iPhone. Dkt. 1 ¶ 28; Dkt. 65 ¶ 33. Unreal Engine is one graphics engine that developers can

1 use. See Decl. of Mark Grimm (Grimm Decl.) ¶ 8. By comparison, one of Unreal Engine’s key
2 competitors, Unity, characterizes itself as “the world’s leading platform for creating and operating
3 interactive, real-time 3D content,” and is available for “more than 20 platforms, including
4 Windows, Mac, iOS, Android, PlayStation, Xbox, Nintendo Switch, and the leading augmented
5 and virtual reality platforms, among others.” 10 Unity is used by the overwhelming majority of
6 Apple developers that use a graphics engine. Id. ¶ 8.
7 Apple has gone to great lengths to help Epic market and distribute its games to hundreds of
8 millions of iPhone customers. Schiller Decl. ¶¶ 4, 65. Apple’s graphic technology, Metal, is just
9 one example. Epic touted Metal as a technology that “revolutionized graphic design” and
10 “enable[d] developers like us to create richer 3D worlds.” Id. ¶ 78. Apple also marketed Epic and
11 its software at major Apple events in 2011 and 2012, giving Epic—which was then a much smaller
12 developer—tremendously valuable publicity. See Grimm Decl. ¶ 7. Apple has facilitated
13 130 million Fortnite downloads—earning Epic more than $550 million. Schmid Decl. ¶ 5. Fortnite
14 has used more than 400 of Apple’s unique API frameworks, five different versions of Apple’s SDK,
15 and six unique Xcode builds. See, e.g., Schiller Decl. ¶¶ 34, 77; Grimm Decl. ¶¶ 3, 5. Apple’s app
16 reviewers have reviewed Fortnite more than 200 times, and Apple has completed more than 140
17 unique app store updates for Fortnite. Schmid Decl. ¶ 5. Moreover, Apple has sent over 500 million
18 marketing communications to Fortnite gamers and spent over a million dollars on social media
19 promotions. Id. ¶ 10. Apple has also revised its in-game gifting policy (Guideline 3.1.1) to
20 accommodate Fortnite’s holiday season marketing campaign. Id. ¶ 7.
21 Apple has devoted considerable resources to supporting Epic. From the launch of Fortnite
22 on iOS, “Apple’s App Store team provided all-hands-on-deck treatment” to support Epic,
23 eventually including an Apple employee in Australia in order to provide 24-hour coverage. Id. ¶ 6.
24 In 2019 alone, Apple expedited app review in response to almost all of Epic’s more than 80 rush
25 requests, even though developers are typically required to make such expedited requests only in
26 extenuating circumstances. Id. ¶ 8. Other unique benefits, too numerous to recite here, are
27
10
28 Unity Software, Inc., Registration Statement Under the Securities Act of 1933 (Form S-1) (Aug.
24, 2020), https://tinyurl.com/unitys1 (last visited Sept. 15, 2020).
APPLE’S OPPOSITION TO EPIC’S PI MOTION - 10 - CASE NO. 4:20-CV-05640-YGR
1 documented more fully in the accompanying declarations. See, e.g., id. ¶¶ 12-14.
2 For reasons having nothing to do with Epic’s claims against Apple, Fortnite’s popularity is
3 on the wane. 11 By July 2020, interest in Fortnite had decreased by nearly 70% as compared to
4 October 2019. 12 This lawsuit (and the front-page headlines it has generated) appears to be part of a
5 marketing campaign designed to reinvigorate interest in Fortnite.
6 D. Epic Intentionally Breaches Its Agreements With Apple, Is Expelled From

The App Store, And Launches A Litigation And Public-Relations Campaign
7
Against Apple.
8 To gain access to Apple’s iPhone users, Epic and its affiliates signed on to Apple’s License
9 Agreement and Guidelines. Dkt. 1 ¶¶ 32, 210; see Dkt. 61-1 ¶¶ 3-7, Ex. A-P. Epic Games, Inc.
10 signed the License Agreement for the account associated with Fortnite, and a wholly owned
11 subsidiary, Epic Games International S.à.r.l. (Epic International), signed the License Agreement
12 for the account associated with Unreal Engine. Epic administers the two accounts “as if they are
13 one.” Schiller Decl. ¶ 57. “The accounts share a single tax ID number, a single individual as the
14 registered account holder, and a single credit [card] number that is used to pay the annual program
15 fee.” Id. “The two accounts share the same test devices, and their [agreements] were renewed within
16 a minute of each other on June 30, 2020.” Id. These agreements and the Guidelines put Epic and
17 its affiliates on notice of the consequences of cheating the system: All of Epic’s “apps” will “be
18 removed from the store,” and any other apps controlled by or affiliated with Epic, including Unreal
19 Engine, could likewise be “expelled from the Developer Program.” Id. at Ex. C at 2; id. at Ex. B
20 ¶ 11.2.
21 Apple invoked these provisions in response to one of the most egregious acts of sabotage
22 that Apple has experienced with any developer. Around 2:00 am on August 13, 2020, Epic’s CEO,
23 Tim Sweeney, wrote to Apple stating the company’s intent to breach its agreements: “Epic will no
24 longer adhere to Apple’s payment processing restrictions.” Schiller Decl. ¶ 62. Hours later, Epic
25
26 11
Crystal Mills, ‘Fortnite’ Popularity Fades As ‘Call of Duty’ Closes Gap, Survey Says, Yahoo
Finance (Apr. 8, 2020), https://tinyurl.com/y3k45f3u (last visited Sept. 14, 2020); Randall
27
Williams, Fortnite’s Slowdown Has Epic Games Battling to Spark New Growth, Bloomberg
28 (Aug. 20, 2019), https://tinyurl.com/yxh4xgz2 (last visited Sept. 14, 2020).
12
Google Trends, https://tinyurl.com/yxrkj4td (last visited Sept. 14, 2020).
1 activated a hidden payment mechanism in Fortnite to slide a change into the app that blatantly
2 evaded App Review. Dkt. 17 at 9; Schiller Decl. ¶¶ 62-65. Epic did not mention the direct pay
3 “hotfix” in its August 3 submission of a Fortnite update to Apple, Dkt. 63 ¶ 23; rather, in order to
4 conceal the change from Apple, Epic caused the change to come from its own servers so as to
5 enable the approved version of Fortnite to offer a non-compliant in-app purchase option. Dkt. 17
6 at 9. “[T]he fact that the new functionality was delivered in two parts instead of one is not a
7 significant difference.” Graff Decl. ¶ 13. What matters is that “Epic’s actions meant that the change
8 was not properly subject to review by Apple.” Id.
9 After Epic triggered the “hotfix” on August 13, Apple notified Epic that Fortnite violated
10 the App Store Review Guidelines and that the app would be removed from the App Store until Epic
11 provided an update that brought Fortnite back into compliance. Schiller Decl., Ex. H. The next day,
12 Apple gave Epic notice that it also was in violation of the License Agreement. Id. at Ex. I. Apple
13 has consistently provided Epic with opportunities to cure its breaches, which it continues to refuse.
14 Id. ¶¶ 66-68. Instead, it engaged in a prepackaged marketing campaign and twice more submitted
15 its app without removing the offending Epic direct payment feature. Id. ¶ 68.
16 Apple also recognized that Unreal Engine posed a potential threat. As noted, Unreal Engine
17 is one of Epic’s other lines of business that Epic controls and offers to developers. Dkt. 61 at 6; see
18 also Schmid Decl. ¶ 20. Unreal Engine poses as a second potential “trojan horse” that would enable
19 Epic to carry through on its threats to undermine the App Store and insert further unauthorized
20 features. Schiller Decl. ¶ 72. Removing Epic’s access to these developer tools reduces such a risk.
21 Id. “[I]t is easy to see that a rogue application affecting the operation of a significant fraction of the
22 world’s iPhones could substantially disrupt local or even worldwide telephony systems, as well as
23 broad segments of the Internet itself.” Graff Decl. ¶ 9. “These risks mean that Apple, as steward of
24 software running on about a billion devices worldwide, needs policies and practices that protect
25 against such potential attacks while not needlessly impeding the flow of application software to its
26 customers’ phones.” Id. Thus, in line with its Guidelines and practices, Schiller Decl. ¶¶ 46-56,
27 Apple warned that it would terminate Epic’s Developer Program membership, as it was entitled to
28 do under the parties’ at-will agreements, if Epic failed to comply with its agreement with Apple by

1 August 28. 13 Epic still has not done so.
2 Although Epic’s willful violation of multiple contractual requirements has led to Fortnite’s
3 removal form the App Store, Fortnite remains widely available on Microsoft Windows, macOS,
4 PlayStation 4, Xbox One, Nintendo Switch, and Android. Dkt. 65 ¶ 3. 14 Tens of millions of iPhone
5 Fortnite players who have previously downloaded the video game “will continue to have access to
6 it on their devices and will have access to any available in-app purchase products.” Schiller Decl.,
7 Ex. H. And despite Epic’s intentional misconduct and campaign to smear Apple, Apple has
8 continued to provide Epic’s users with services. For example, Apple has agreed to continue to allow
9 Epic’s customers to use Sign In With Apple for the time being. Srinivasan Decl., Ex. A.
10 On August 13, 2020, Epic filed its Complaint against Apple. That same day, Epic’s CEO
11 threatened that Epic would be “in conflict with Apple on a multitude of fronts—creative, technical,
12 business, and legal—for so long as it takes to bring about change ….” Schiller Decl., Ex. G at 2;
13 see also Dkt. 36 at 18-19. A few days later, Epic presented the Court with an extensive “emergency”
14 motion premised on supposed harms that Epic could avoid simply by complying with its contractual
15 obligations.
16 E. The Court Denies In Part And Grants In Part Epic’s Request For A TRO,
And Epic Continues To Breach Its Agreements.
17
On August 24, 2020, the Court issued its Order granting in part and denying in part Epic’s
18
motion for a TRO. Dkt. 48. The Court held that it could not “conclude that Epic has met the high
19
burden of demonstrating a likelihood of success on the merits, especially in the antitrust context”
20
with regards to both Fortnite and Unreal Engine. Id. at 4.
21
As to Fortnite, the Court found that “Epic Games has not yet demonstrated irreparable
22
harm,” “[t]he current predicament appears of [Epic’s] own making,” and “Epic Games strategically
23
chose to breach its agreements with Apple.” Id. at 5-6. The Court held that Epic could “easily” fix
24
the problem and “remains free to maintain its agreements with Apple in breach status as this
25
26 13
Epic’s End User License Agreement contains similar provisions. End User License Agreement
for Unreal Engine: https://tinyurl.com/y5hbagot (last visited Sept. 14, 2020) at § 17 (providing for
27
termination by Epic if the licensee “materially breach[es] any provision of this Agreement”).
14
28 Epic Games, FAQs: Where Can I Download Battle Royale?, https://tinyurl.com/y2gzd8rk (last
visited Sept. 14, 2020).
1 litigation continues, but … [t]he sensible way to proceed is for [Epic to comply with the agreements
2 and guidelines] and continue to operate while it builds a record.” Id. at 5 (citation and internal
3 quotation marks omitted). “That Epic Games would prefer not to litigate in that context does not
4 mean that ‘irreparable harm’ exists.” Id. at 5.
5 In contrast, the Court temporarily restrained Apple from taking action involving Unreal
6 Engine because “[f]or now, Epic International appears to have separate developer program license
7 agreements with Apple and those agreements have not been breached.” Id. at 5-8. At the same time,
8 the court expressly noted that “Apple’s reliance on its ‘historical practice’ of removing all
9 ‘affiliated’ developer accounts in similar situations or on broad language in the operative contract
10 at issue here can be better evaluated with full briefing.” Id. at 5-6.
11 Since the TRO ruling, Apple’s need to take action against both entities has been reinforced
12 by information that Epic International (the Unreal Engine licensee) is collecting payment from
13 iPhone users through the direct payment services that Epic Games (the Fortnite licensee)
14 improperly inserted into Fortnite. See Schiller Decl. ¶ 68 (public reports indicate that circumvented
15 payments from U.S. users go to Epic Games, and those from foreign users go to Epic International).
16 III. LEGAL STANDARD

17 A preliminary injunction is “an extraordinary remedy never awarded as of right.” Winter v.
18 Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008). In general, a “plaintiff seeking a preliminary
19 injunction must establish” (1) “that he is likely to succeed on the merits,” (2) “that he is likely to
20 suffer irreparable harm in the absence of preliminary relief,” (3) “that the balance of equities tips
21 in his favor,” and (4) “that an injunction is in the public interest.” Id. at 20. The party seeking the
22 injunction “must satisfy Winter’s four-factor test.” Garcia v. Google, Inc., 786 F.3d 733, 740 (9th
23 Cir. 2015) (en banc).
24 IV. ARGUMENT
25 In seeking a mandatory injunction requiring Apple to alter its contracts and give Epic
26 privileges that no other developer enjoys, Epic’s “burden here is doubly demanding.” Id. In
27 response to Epic’s willful breaches and intentional misconduct, Apple has exercised its contractual
28 rights to terminate Epic from the developer program to protect both Apple and end users. By asking

1 this Court to compel Apple to continue to allow both Fortnite and Unreal Engine to participate in
2 the iPhone ecosystem on terms other than those to which the parties contractually agreed, Epic is
3 seeking a mandatory (as distinguished from a prohibitory) injunction. Stanley v. Univ. of S. Cal.,
4 13 F.3d 1313, 1320 (9th Cir. 1994). Accordingly, Epic’s motion must be denied “unless the facts
5 and law clearly favor the moving party.” Garcia, 786 F.3d at 740. As explained below, Epic’s
6 requests have no factual or legal support, and therefore no preliminary injunction should issue.
7 A. Epic Will Not Succeed On The Merits Of Its Antitrust Claims.

8 At the TRO stage, the Court concluded that Epic had not “met the high burden of
9 demonstrating a likelihood of success on the merits, especially in the antitrust context.” Dkt. 48 at
10 4. Since then, Epic has jettisoned its “essential facilities” theory, and it cannot succeed on its two
11 remaining theories of “monopoly maintenance” and “tying.” The antitrust laws provide no support
12 for Epic’s self-serving campaign to upend the operation of the App Store, an innovation that has
13 exponentially increased output, reduced prices, enriched developers like Epic, and dramatically
14 improved consumer choice and welfare. 15
15 1. Epic’s monopoly maintenance claim will not succeed.

16 To prevail on its theory that Apple engaged in unlawful monopolization, Epic must prove
17 both “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition
18 or maintenance of that power as distinguished from growth or development as a consequence of a
19 superior product, business acumen, or historic accident.” United States v. Grinnell Corp., 384 U.S.
20 563, 570-71 (1966). Epic has not shown that it is likely to succeed in proving either element.
21 a. Epic’s proposed market definition is untenable.

22 “A threshold step in any antitrust case is to accurately define the relevant market, which
23 refers to ‘the area of effective competition.’” FTC v. Qualcomm Inc., 969 F.3d 974, 992 (9th Cir.
24 2020) (quoting Ohio v. Am. Express Co., 138 S. Ct. 2274, 2285 (2018) (Amex)). All of Epic’s
25
26 15
The 5-4 decision in Apple Inc. v. Pepper, 139 S. Ct. 1514, 1520 (2019), addressed the “sole
question presented at th[at] early stage of the case,” namely, whether iPhone users who purchased
27
apps from the App Store were “direct” purchasers with standing to sue. The Court expressly did
28 “not assess the merits of the plaintiffs’ antitrust claims against Apple” or “consider any other
defenses Apple might have.” Id. at 1519.
1 antitrust claims—and its insistence that Apple is a “monopolist”—turn on its assertion that the
2 relevant market is “the iOS App Distribution Market.” Dkt. 61 at 8, 12. But the notion that the
3 market relevant for Epic’s apps is limited to distribution via iPhones—which Epic admits is the
4 “foundation” of its antitrust argument (id. at 12)—is meritless if not frivolous.
5 Epic distributes Fortnite not just on Apple devices, but through multiple computing
6 platforms—including PCs, Android devices, Xbox, PlayStation, and Nintendo’s Switch. Hitt Decl.
7 ¶¶ 20-24. Epic itself built Fortnite to play the same on different platforms, and actively promotes
8 cross-platform play. Id. ¶ 26. Thus, the alternative means to distribute Fortnite present a textbook
9 example of services that are “reasonably interchangeable” when used “for the same purposes.”
10 United States v. E.I. du Pont de Nemours & Co., 351 U.S. 377, 395 (1956); see, e.g., Hicks v. PGA
11 Tour, Inc., 897 F.3d 1109, 1120-21 (9th Cir. 2018) (dismissing antitrust claim when relevant market
12 ignored multiple ways of reaching consumers).
13 A “manufacturer’s own products do not themselves comprise a relevant product market.”
14 Apple Inc. v. Psystar Corp., 586 F. Supp. 2d 1190, 1198 (N.D. Cal. 2008). In Psystar, for example,
15 Judge Alsup held that macOS was not a relevant product market because “MacOS performs the
16 same functions as other operating systems.” Id. at 1199. Similarly, the relevant market here includes
17 at minimum the competing platforms available to Epic and other game developers. See Hitt Decl.
18 ¶ 14 (“[T]he relevant market cannot be limited to the distribution of iOS apps, and must at least
19 include competing platforms on which Epic already distributes and monetizes Fortnite.”). That is
20 because the iPhone is only one of a number of “reasonably interchangeable” platforms for
21 distributing Fortnite and Epic’s other games to consumers.
22 Epic attempts to distinguish Psystar, and limit the relevant market to a single brand, by
23 asserting that iOS is a “primary market” and app distribution is an “aftermarket.” Dkt. 61 at 13 &
24 n.3 (citing Newcal Indus., Ind. v. Ikon Office Sols., 513 F.3d 1038, 1048 (9th Cir. 2008), and
25 Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (1992)). But Epic has no basis for
26 arguing that components of Apple’s integrated offerings should be considered separately. Epic’s
27 own economic expert does not contend that the proposed “iOS App Distribution Market” is an
28 aftermarket—that word does not even appear in his declaration (or in Epic’s complaint). See Hitt

1 Decl. ¶ 43. Rather, Epic’s expert proposes an iOS-only market definition by erroneously
2 disregarding the other platforms that are manifestly available to distribute Epic’s own products,
3 including Fortnite, to end users. Id. ¶¶ 20-24. Simply put, this is not an aftermarket case—and Epic
4 has no legal, expert, or factual support for its contrary assertion.
5 The relevant market here includes at least the other platforms on which Epic distributes
6 Fortnite. Id. ¶ 15. Within such a market, Apple has a market share of between 10 and 20 percent,
7 id. ¶ 15; see also id. at ¶¶ 49-50—well under the amount necessary to infer monopoly power. See
8 ABA Section of Antitrust Law, Antitrust Law Developments (8th ed. 2017), at 189 (“Since
9 Jefferson Parish [Hosp. Dist. No. 2 v. Hyde, 466 U.S. 2 (1984)], no court has inferred the requisite
10 market power from a market share below 30 percent.”). Indeed, only a fraction of Epic’s customers
11 access Fortnite using an iPhone, and Epic’s revenues from other platforms greatly exceed its
12 revenues from iPhone players. 16 See Schmid Decl. ¶ 18.
13 Epic’s own conduct in developing and distributing Fortnite establishes that the iPhone is
14 “reasonably interchangeable” with other mobile devices running non-iOS operating systems, with
15 PCs and laptops, and with gaming consoles. Indeed, after Fortnite was removed from the App
16 Store, Epic urged users to switch platforms, explaining that the “party continues on PlayStation 4,
17 Xbox One, Nintendo Switch, PC, Mac, GeForce Now, and through both the Epic Games app at
18 epicgames.com and the Samsung Galaxy Store.” Hitt Decl. ¶ 39. As a result, Epic’s antitrust claims
19 falter at the outset because they rest on “a proposed relevant market that clearly does not encompass
20 all interchangeable substitute products.” Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d
21 430, 436-37 (3d Cir. 1997) (citing cases); see also, e.g., Hicks, 897 F.3d at 1121.
22 b. Epic identifies no unlawful monopoly maintenance.

23 A “monopoly maintenance” claim requires a predicate monopoly in the relevant market,
24 which is lacking here as explained above. Regardless, Epic has not identified any unlawful conduct
25 undertaken by Apple to “maintain” a monopoly in its alleged distribution market. Epic observes
26 that Apple contractually requires distribution of iPhone apps through the App Store, and makes the
27 16
According to Epic’s CEO, only 20% of Fortnite users have accessed the game exclusively on
28 Apple devices; and among active users, only 10% play through iOS. Dkt. 65 ¶ 3. Moreover, in 2018
and 2019, less than 15% of Epic’s Fortnite revenue came from iOS. Hitt Decl. ¶ 50.
1 conclusory assertion that this requirement “completely eliminate[s]” competition in the proposed
2 “iOS App Distribution Market,” Dkt. 61 at 15, but this argument simply repeats Epic’s refusal to
3 acknowledge alternative distribution options. “If competitors can reach the ultimate consumers of
4 the product by employing existing or potential alternative channels of distribution, it is unclear
5 whether such restrictions foreclose from competition any part of the relevant market.” Omega
6 Envtl., Inc. v. Gilbarco, Inc., 127 F.3d 1157, 1163 (9th Cir. 1997).
7 Apple has spent billions of dollars creating developer tools and other IP that it licenses to
8 developers who wish to distribute games and other apps to iPhone users. See Schiller Decl. ¶¶ 5,
9 16. An IP owner, even if a monopolist (which Apple is not), is not required to allow unfettered and
10 uncompensated use of its own technology. See Herbert Hovenkamp et al., IP and Antitrust: An
11 Analysis of Antitrust Principles Applied to Intellectual Property Law § 13.03 (3rd ed., 2016 Supp.
12 2019) (citing United States v. Microsoft Corp., 253 F.3d 34, 63-64 (D.C. Cir. 2001)). Accordingly,
13 Apple requires that apps developed using Apple software be distributed through the specified
14 channel (and only after approval by Apple), and that the developer pay a commission on certain
15 sales. There is nothing unlawful about that business decision.
16 Epic’s defective theory of monopoly maintenance does not provide any legal basis for a
17 preliminary injunction that is independent from its flawed tying theory. Epic seeks to enjoin “the
18 restriction that Epic defied,” Dkt. 61 at 12, and to require Apple to return Fortnite to the App Store
19 with an alternative to IAP for facilitating in-app purchases. Epic identifies no other “maintenance”
20 activity that it seeks to enjoin. Yet evading the IAP functionality for Epic apps is the same remedy
21 that Epic seeks for its tying claim, and it fails for the same reasons (discussed below). 17
22 2. Epic’s tying claims will fail because IAP is not a separate market or
product.
23
Epic devotes the bulk of its merits argument to contending that Apple “ties” “iOS App
24
Distribution” services (the “tying” product) to “iOS In-App Payment Processing” services (the
25
“tied” product). Dkt. 61 at 12; see id. at 15-23 (discussing tying claims). Epic’s tying theory “falters
26
17
Epic’s antitrust theories also have nothing to do with Unreal Engine, and thus cannot support
27
that aspect of the requested injunction. See Pac. Radiation Oncology, LLC v. Queen’s Med. Ctr.,
28 810 F.3d 631, 633 (9th Cir. 2015) (“When a plaintiff seeks injunctive relief based on claims not
pled in the complaint, the court does not have the authority to issue an injunction”).
1 on the first, most fundamental requirement—the existence of a tie.” Aerotec Int’l, Inc. v. Honeywell
2 Int’l, Inc., 836 F.3d 1171, 1178 (9th Cir. 2016). “A tie only exists where ‘the defendant improperly
3 imposes conditions that explicitly or practically require buyers to take the second product if they
4 want the first one.’” Id. (quoting 10 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶
5 1752b (3d ed. 2011)); see also It’s My Party, Inc. v. Live Nation, Inc., 811 F.3d 676, 684 (4th Cir.
6 2016). There is no such conditioning here.
7 Apple does not force developers to use IAP in order to have an app distributed. However,
8 if developers do charge for in-app purchases, then they must pay Apple’s commission. Epic’s
9 suggestion that the commission is only for the use of IAP has no basis and, indeed, is contrary to
10 the record. See Schiller Decl. ¶¶ 5, 7, 33, 41. IAP is part of an integrated service delivered in the
11 form of a single transaction, not a separate product. Schmalensee Decl. ¶¶ 44-45. In the iPhone
12 business model, the commission is the return on Apple’s investment in the App Store and the full
13 suite of IP, tools, and services Apple offers to developers. See Schiller Decl. ¶ 7; Hitt Decl. ¶ 75;
14 Schmalensee Decl. ¶ 29, 57. It is what allows Apple to offer access to its platform to any developer
15 for $99 and to offer free distribution for most apps on the App Store.
16 Developers are free to adopt other business models that do not include in-app digital
17 purchases on which they must pay Apple a commission. A developer can generate revenue through
18 advertising, through the sale of physical goods and services, and through any number of other ways
19 that will result in no commission to Apple. 18 Id. ¶ 26. None of these requires the use of IAP. Id.
20 ¶ 46. Over 80% of the apps on the App Store embrace those models. See Schiller Decl. ¶ 6;
21 Schmalensee Decl. ¶ 26. Indeed, Epic is among the 80% of developers that pay just $99 a year for
22 access, and takes advantage of this model to freely distribute other apps and to build its Unreal
23 Engine business. Epic’s contention that IAP is a “tied” product that should be enjoined is nothing
24 other than a demand that this Court excuse Epic from its contractual obligation to pay commissions.
25 Epic is not likely to succeed in subverting tying doctrine to that end.
26 Although sales of in-app products in Fortnite (which is free to download and play) must be
27
18
28 See, e.g., Apple, Choosing a Business Model, https://developer.apple.com/app-store/business-
models/ (last visited Sept. 15, 2020).
1 made through IAP, Epic could have easily chosen a different business model to monetize Fortnite
2 without in-app products. Schmalensee Decl. ¶ 26; Schiller Decl. ¶ 39. Thus, Epic’s conclusory
3 assertion that “Apple conditions use of the tying product, app distribution through the App Store,
4 on use of the tied product, in-app payment processing for digital content through IAP,” Dkt. 61 at
5 16, is flat wrong. And even when a developer voluntarily decides to offer digital in-app purchases,
6 that does not mean that (as the law requires to prove tying) “there exist two distinct products or
7 services in different markets whose sales are tied together.” Paladin Assocs., Inc. v. Montana Power
8 Co., 328 F.3d 1145, 1159 (9th Cir. 2003).
9 In addition, where, as here, the allegedly tied product is an essential ingredient of the overall
10 “method of business” with customers, courts view them as one product not as two tied together.
11 Rick-Mik Enters., Inc. v. Equilon Enters. LLC, 532 F.3d 963, 974 (9th Cir. 2008) (quoting Will v.
12 Comprehensive Accounting Corp., 776 F.2d 665, 670 n.1 (7th Cir 1985)). That is especially true
13 where, as here, the allegedly separate products have always been integrated. See id. at 975. IAP and
14 the App Store have never been distinct or separated—from each other, or from the overall iPhone
15 platform. Schiller Decl. ¶ 32. Moreover, Epic’s tying claim will fail because it cannot satisfy the
16 “purchaser demand” test for finding distinct products—i.e., whether sufficient demand exists for
17 the tied product separate from the tying product. Rick-Mik Enters., Inc., 532 F.3d at 975 (quoting
18 Jefferson Parish Hosp. Dist. No. 2, 466 U.S. at 19). As Apple’s economic expert attests, no demand
19 exists for IAP that is separate from distribution via the App Store. See Schmalensee Decl. ¶¶ 46-
20 54; see also Schiller Decl. ¶ 45. For these reasons, among others, Epic is not likely to succeed on
21 its tying claims. 19
22
23 19
The cases in the text involve one-sided markets, but it is important to recognize that the iPhone
24 is a classic example of a two-sided platform connecting developers with end users. Schmalensee
Decl. ¶¶ 39-45; see David S. Evans & Richard Schmalensee, Matchmakers: The New Economics
25 of Multisided Platforms 117 (2016) (“A year after its launch, the iPhone was a two-sided platform
connecting users and app developers.”). It is a transaction platform that provides “different
26 products or services to two different groups who both depend on the platform to intermediate
between them.” Amex, 138 S. Ct. at 2280. The function of such a platform is to “facilitate a single,
27
simultaneous transaction between” the two sides—in this case, app developers and iPhone users.
28 Amex, 138 S. Ct. at 2286; see Schmalensee Decl. ¶¶ 44-45. As a matter of antitrust analysis,
transaction platforms supply “only one product—transactions” and accordingly “only one market
1 3. Apple’s iPhone business model is procompetitive.
2 Finally, Epic’s assertion that Apple’s conduct “has clear anti-competitive effects,” Dkt. 61
3 at 20, is notably devoid of any economic support from Epic’s expert, see Hitt Decl. ¶ 56, and its
4 assertion that there are “no procompetitive justifications for Apple’s conduct,” Dkt. 61 at 20
5 (capitalization altered), is contravened by the record and the everyday experience of smartphone
6 users over the last decade. The record now before the Court establishes that the challenged practices
7 have substantial procompetitive benefits, to both consumers and developers, providing another
8 independently sufficient reason that Epic is unlikely to succeed in proving either monopoly
9 maintenance or tying.
10 Despite Epic’s suggestion to the contrary, per se analysis has no place in this case. The rule
11 of reason applies to any tying claim that “involves software that serves as a platform for third-party
12 applications.” Microsoft, 253 F.3d 34 at 89 (en banc); see also id. at 95 (no per se claim where “the
13 tying product is software whose major purpose is to serve as a platform for third-party applications
14 and the tied product is complementary software functionality”). Just as the Microsoft decision
15 applied the rule of reason to Microsoft’s integration of certain APIs into the Windows operating
16 system, here the rule of reason must apply to Apple’s integration of its StoreKit APIs into the App
17 Store software platform (and indeed, the integration of the App Store with the iPhone), an
18 integration that offers numerous benefits to consumers and developers. Schiller Decl. ¶¶ 34-36;
19 Schmalensee Decl. ¶¶ 31, 34-37. These benefits offset and greatly outweigh any alleged harm
20 resulting from the challenged conduct. Microsoft, 253 F.3d at 59; see also Mozart Co. v. Mercedes-
21 Benz of North America, Inc., 833 F.2d 1342, 1348-51 (9th Cir. 1987). They also constitute
22 legitimate business justifications for Apple’s conduct. See Image Tech. Servs., Inc. v. Eastman
23 Kodak Co., 125 F.3d 1195, 1220 n.12 (9th Cir. 1997); Universal Analytics, Inc. v. MacNeal-
24 Schwendler Corp., 914 F.2d 1256, 1258 (9th Cir. 1990).
25 The number of apps in the App Store grew from 500 at its start to 1.8 million today. End
26 users have downloaded billions of iPhone apps—the great majority for free—and developers, like
27
28 should be defined.” Amex, 138 S. Ct. at 2286-87 (quotation marks and citations omitted). Epic’s
refusal to recognize this reality is another reason that its antitrust claims will fail.
1 Epic, have used the App Store to create innovative businesses that generate or deliver hundreds of
2 millions of dollars in annual revenues. Schiller Decl. ¶¶ 8, 36, 39, 45, 65; Hitt Decl. ¶ 62. As a
3 matter of basic economics, such spectacular growth in output is wholly inconsistent with the claim
4 that Apple’s conduct lacks competitive justification. Monopoly is synonymous with unjustified
5 output restriction, not vigorous output expansion. See Brooke Grp., Ltd. v. Brown & Williamson
6 Tobacco Corp., 509 U.S. 209, 233 (1993) (“Supracompetitive pricing entails a restriction in
7 output.”); see also Amex, 138 S. Ct. at 2288 (“‘Market power is the ability to raise price profitably
8 by restricting output.’”).
9 Last year, the App Store facilitated $138 billion in commerce in the United States alone
10 with more than $116 billion going to developers. 20 This was made possible by the tools, education,
11 and support services that Apple makes available to developers. Epic itself has hugely benefited—
12 and earned hundreds of millions of dollars—from the tools that Apple has contractually agreed to
13 provide developers as well as a host of extra-contractual opportunities conferred on Fortnite. See
14 Schmid Decl. ¶¶ 4-17; Schmalensee Decl. ¶¶ 65-67. Commissions on app purchases or in-app
15 digital purchases through the App Store provide Apple with a return on its investment. Epic’s
16 response that “creating the iOS platform does not also entitle Apple to compensation for app
17 distribution and in-app payment processing services,” Dkt. 61 at 21, is absurd. It is not
18 anticompetitive for a provider of products and services to require payment, and nothing about the
19 way that Apple has structured its compensation system raises antitrust concerns. 21
20 To be sure, as Epic notes, Dkt. 61 at 21-22, Apple might have structured its business
21 differently when it introduced the App Store more than a decade ago. Apple adopted a business
22 model of (i) charging iPhone users for device sales; and (ii) charging developers a modest annual
23 fee plus a commission from app purchases and in-app digital purchases. Apple could perhaps have
24 charged developers a higher, upfront price for its developer tools, marketing support, and other
25 valuable features of the iPhone ecosystem. Alternatively, it could perhaps have put the entire price
26
20
Cook July 2020 Statement at 3.
27 21
Epic complains that the commission is charged on digital purchases but not physical purchases,
28 and that macOS and iOS do not work exactly the same with respect to app distribution. Dkt. 61 at
17. These are red herrings. See Schiller Decl. ¶¶ 9, 24-25, 39.
1 burden on device users. See, e.g., Hitt Decl. ¶¶ 71-76 (critiquing Epic’s proposed alternative
2 monetization methods). But if the Court were to enjoin one piece of the extant model (the 30%
3 commission on in-app purchases), Apple would have to rework the entire system—with disruptive,
4 extensive, expensive, and likely adverse consequences for other developers and consumers. Id.
5 ¶¶ 74-76; Schmalensee ¶ 58. Whether or not these alternatives would benefit Epic today, Apple
6 (and the Court) must consider their impact on other developers and iPhone customers, and Epic has
7 not even tried to show what the net effect of a different model would be.
8 It is clear that Epic doesn’t want to pay commissions to Apple, even though it agreed to do
9 so. But nothing in antitrust law requires Apple to provide the benefits it offers to developers “under
10 terms and conditions favorable to” Epic. Pac. Bell Tel. Co. v. LinkLine Commc’ns, Inc., 555 U.S.
11 438, 451 (2009). There is nothing anticompetitive about charging others to use one’s service (as
12 Epic itself does). See Hitt Decl. ¶ 56; Schmalensee Decl. ¶¶ 19-20, 43, 57-59, 62. Other app stores
13 for computing platforms also charge similar commissions, at a similar rate; this is strong evidence
14 that Apple’s business judgment here is a rational, pro-competitive and sound one, even setting aside
15 that having 70% of revenue going to developers represents a dramatic improvement over the
16 revenues developers earned from software distribution before the App Store. See Schiller Decl. ¶¶
17 3, 7; Hitt Decl. ¶ 58; Schmalensee Decl. ¶ 62. That Epic wishes to pay a lower price than what
18 Apple charges, or nothing at all, does not make the iPhone’s business model anticompetitive. See
19 Qualcomm, 969 F.3d at 994 n.15. Particularly given the extensive benefits that Epic has derived
20 from Apple, Epic has no prospect of succeeding on the merits of its claims. 22
21 B. Epic Will Not Suffer Irreparable Harm Because Its Claimed Harm Is
Entirely Self-Inflicted.
22
Epic is a saboteur, not a martyr. It neither needs nor is equitably entitled to the extraordinary
23
relief it seeks from this Court. Indeed, Epic does not even try to explain why it had to breach its
24
contracts to bring this case—let alone why it had to so fundamentally breach Apple’s trust by
25
introducing its “hotfix.” And Epic could have avoided any further harm involving both Fortnite
26
and Unreal Engine—with a simple keystroke.
27
22
28 Epic’s state law claims will fail for essentially the same reasons. See Chavez v. Whirlpool Corp.,
93 Cal. App. 4th 363, 375 (2001).
1 Three points remain as true today as they did at the TRO stage: First, every bit of harm Epic
2 asks this Court to address is entirely self-inflicted. This Court was right when it held in its TRO
3 decision that Epic’s “current predicament” is “of its own making,” and that “self-inflicted wounds
4 are not irreparable injury.” Dkt. 48 at 5 (quoting Al Otro Lado v. Wolf, 952 F.3d 999, 1008 (9th Cir.
5 2020)). That proposition is hornbook law. See, e.g., 11A Charles Alan Wright & Arthur R.
6 Miller, Federal Practice and Procedure § 2948.1 (3d ed. 2020). Second, a preliminary injunction is
7 an extraordinary step that a court takes only when it is necessary to avoid harm. Since Epic itself
8 can solve its own problems, it has no need for judicial intervention—as the Court has already
9 recognized. Third, as this Court also held, harm that “results from the express terms of [the]
10 contract” cannot be irreparable. Dkt. 48 at 5 (quoting Salt Lake Trib. Publ’g Co. v. AT&T Corp.,
11 320 F.3d 1081, 1106 (10th Cir. 2003)). Having executed contracts granting Apple the right to do
12 exactly what it did, Epic cannot now complain of the harm it agreed to.
13 There is no dispute about the scope of Epic’s contractual commitment. Epic does not dispute
14 that its “hotfix” was a breach. And it does not dispute that the breach meant Apple had the right to
15 “block[] consumer access to Fortnite or forthcoming updates.” Schiller Decl., Ex. C at 3. Nor does
16 it dispute that Apple always had the right to terminate the developer agreements at any time, for
17 any reason, not just for Epic and not just for Fortnite, but for any Epic affiliate under any License
18 Agreement. Id. at Ex. A ¶ 10 (“Apple may terminate or suspend you as a registered Apple
19 Developer at any time in Apple’s sole discretion.”); Id. at Ex. B ¶ 11.2 (“Either party may terminate
20 this Agreement for its convenience, or for any reason or no reason[.]”).
21 Nor should there be any dispute about what Epic, and its affiliates, should reasonably have
22 expected Apple to do. As documented above, the Guidelines advise in no uncertain terms that
23 developers who attempt to “cheat the system,” as Epic did here, “will be expelled from the
24 Developer Program.” Id. at Ex. C at 2 (emphasis added). While Epic labels Apple’s response
25 “retaliatory,” it is not retaliation for one party to a contract to implement the consequence to which
26 both parties agreed in the event of a breach. That is true not just of Epic Games, but also of its
27 wholly owned subsidiary, Epic International, which is led by the same person who declared war on
28 Apple and which is receiving illicit payments through the Fortnite “hotfix.”

1 Based on a limited record, this Court temporarily restrained Apple from blocking access to
2 Unreal Engine because “[t]he relevant agreement . . . is a fully integrated document that explicitly
3 walls off the developer program license agreement.” Dkt. 48 at 5. The Court agreed, however, that
4 “Apple’s reliance on its ‘historical practice’ of removing all ‘affiliated’ developer accounts in
5 similar situations or on broad language in the operative contract at issue here can be better evaluated
6 with full briefing.” Id. at 5-6. As explained above, Apple’s practice of removing affiliated developer
7 accounts is well-established. Schiller Decl. ¶¶ 54-55. And as demonstrated below, an app developer
8 can inflict incalculable harm on Apple’s entire ecosystem. Epic’s brazen insertion of the “hotfix”
9 into Fortnite raises the very real possibility that it will attempt to use Unreal Engine to distribute
10 other secret and unauthorized code. When an app developer proves to be untrustworthy, Apple has
11 to have the power to protect itself and its customers from further harm.
12 Epic does not come to this Court with clean hands. Conceding as much, Epic argues that its
13 unclean hands do not foreclose its antitrust claims. Dkt. 61 at 23. But as this Court recognized in
14 its TRO decision—and as Epic now admits the Court “correctly” acknowledged, id. at 24—the
15 cases Epic cites merely hold that “unclean hands” is not an affirmative defense to an antitrust claim,
16 an issue “not currently before the Court.” Dkt. 48 at 5 n.2; Perma Life Mufflers, Inc. v. Int’l Parts
17 Corp., 392 U.S. 134, 140 (1968); Memorex Corp. v. Int’l Bus. Mach. Corp., 555 F.2d 1379, 1381
18 (9th Cir. 1977). At this early stage, the issue is not whether “conduct by [Epic] defeats [its] right to
19 sue,” Perma Life Mufflers, 392 U.S. at 140, but whether it has suffered any irreparable harm.
20 Epic further asserts that “the same principle that prevents unclean hands from being a
21 defense to an antitrust claim also prevents it from being a basis to find lack of irreparable harm.”
22 Dkt. 61 at 24. Epic cites no authority for that proposition, which conflicts with the venerable maxim
23 that he who comes into equity must do so with clean hands. In any event, at the preliminary
24 injunction stage, it suffices that Epic created the harm, that Epic agreed it would suffer these
25 consequences based on its conduct, and that Epic can avoid any harm right now by changing course.
26 All of these facts are undisputed, and they mean that the “extraordinary remedy” of a mandatory
27 preliminary injunction is unavailable irrespective of the unclean hands doctrine.
28 Epic’s only other rebuttal is to cite as “analogous” cases that are anything but. Id. Epic first

1 likens itself to the distributor plaintiffs in Acquaire v. Canada Dry Bottling Co., 24 F.3d 401, 411
2 (2d Cir. 1994), who refused to comply with a bottler’s resale price requirements. In enjoining the
3 bottler from withholding product to punish those distributors, the Second Circuit did not endorse a
4 rule allowing antitrust plaintiffs to disavow contractual provisions they do not like, while forcing
5 the defendant to provide them with contractual benefits during the pendency of litigation, as long
6 as the plaintiffs cry “retaliation.” Instead, the court focused on several specific features of the
7 defendant’s conduct in that case, including that the defendant made after-the-fact changes to its
8 policy of withholding product from distributors who failed to comply, that it did not even comply
9 with its own stated policy, and that the plaintiffs showed they could be “driven out of business”
10 absent an injunction. Acquaire, 24 F.3d at 412. The court therefore rejected the premise of the
11 defendant’s claim that the plaintiffs’ injuries were “self-inflicted.” Id. at 411. None of the critical
12 facts of Acquaire are present here; indeed, it is indisputable that Epic’s asserted injuries are self-
13 inflicted—as the Court has already recognized. Epic identifies no authority that would undermine
14 this Court’s prior holding and allow antitrust plaintiffs to manufacture their own irreparable
15 injuries, when all other plaintiffs are held to the rule that self-created harm fails to support injunctive
16 relief. Al Otro Lado, 952 F.3d at 1008. 23
17 Finally, a word about Epic’s claimed reputational harm. Epic has engaged in a full-scale,
18 pre-planned media blitz surrounding its decision to breach its agreement with Apple, creating ad
19 campaigns around the effort that continue to this day. If Epic were truly concerned that it would
20 suffer reputational injury from this dispute, it would not be engaging in these elaborate efforts to
21 publicize it. From all appearances (including the #freefortnite campaign), Epic thinks its conduct
22 here will engender goodwill, boost its reputation, and drive users to Fortnite, not the opposite. That
23 is not harm.
24 23
Epic also cites cases suggesting that courts may refuse to enforce a “contractual right” or a
25 “contractual clause” that is itself illegal. See Dkt. 61 at 24-25 (citing Milsen Co. v. Southland Corp.,
454 F.2d 363, 368-69 (7th Cir. 1971); Germon v. Times Mirror Co., 520 F.2d 786, 788 (9th Cir.
26 1975)). But that is not what Epic seeks. Rather, Epic asks this Court to rewrite the contracts so that
Epic can reap all the benefits of the iPhone ecosystem while depriving Apple of its commissions.
27
See Dkt. 61 at 25 n.8 (acknowledging that Epic seeks to invalidate some provisions of the License
28 Agreement while leaving others in force). As explained above, this would require Apple to rework
its entire business model.
8 C. The Balance Of Equities Tips Sharply In Apple’s Favor.

9 In contrast to Epic, Apple would face incalculable harm if this Court issues a preliminary
10 injunction—and Apple has no power to avoid it. The reason goes back to the purpose of Apple’s
11 rule against sneaking undisclosed code past its review team and the need to apply that rule not just
12 to a company that as a formal matter executed a contract, but also to all affiliated entities acting in
13 concert: The rules are there to protect the entire ecosystem of iPhone customers and developers.
14 Stripping Apple of its power to enforce those rules would also pose an imminent threat to
15 Apple’s customers’ data (including children’s data), to the safety and security of the App Store,
16 and—more broadly, to the integrity of the iPhone. See Schiller Decl. ¶¶ 46, 52. Because Epic’s
17 “hotfix” circumvents the customer safeguards of Apple’s IAP, it threatens to put the customer’s
18 confidential information “at vastly greater risk.” Id. ¶ 35. Indeed, users who previously downloaded
19 the “hotfix” version of Fortnite are already facing the prospect that Epic’s alternative payment
20 system may compromise their privacy or data security. Id. ¶¶ 68, 70, 76. The alternate payment
21 system Epic snuck into Fortnite also lacks the parental controls that Apple’s IAP offers to restrict
22 online purchases. See id. ¶¶ 35, 70. The preliminary injunction sought here would increase those
23 risks exponentially: By compelling Apple to return the unauthorized version of the “hotfix” version
24 of Fortnite to the App Store, additional users would be able to download the version of the app
25 with Epic’s potentially unsecure direct payment option. See id. ¶ 68. The injuries resulting from an
26 injunction compelling Apple to restore Fortnite to the App Store would go well beyond the “los[s
27 of] commissions,” Dkt. 61 at 30, and threaten the integrity of the iPhone ecosystem itself.
28 Those injuries would be compounded if Apple were compelled to continue to provide Epic

1 access to the Apple Developer Membership program, which Epic uses to offer the Unreal Engine
2 graphics engine to other developers. Schmid Decl. ¶ 20. By participating in the program, Epic gains
3 access to a full suite of developer tools, software, and other IP from Apple, as well as pre-release
4 versions of iOS updates. Schiller Decl. ¶¶ 10, 12. Unreal Engine, in turn, provides developers a
5 software development platform that allows developers to more quickly and easily build apps.
6 Schmid Decl. ¶ 20. Those shortcuts provide Epic with a possible trojan horse to further harm
7 Apple’s customers, developers, and goodwill. See, e.g., Schiller Decl. ¶¶ 71-73. Should this Court
8 require Apple to continue supporting Epic in its developer program, the Court’s order would give
9 Epic access to the developer tools that it could use to insert malware, or other unauthorized features
10 such as alternative direct payment mechanisms, in the version of Unreal Engine for iOS devices,
11 and thus the non-Epic apps that are available on the App Store and rely on Unreal Engine. Id. ¶ 72.
12 By depriving Apple of the contractual remedy that it has to protect itself against Epic’s announced
13 intent to subvert the App Store—the right to terminate its developer agreement—the injunction
14 Epic seeks would leave Apple defenseless against Epic’s assault.
15 Each of the above harms is immediate given the fast-moving nature of app development. Id.
16 ¶ 70. And the harms are compounded by the fact that Epic is actively encouraging developers to
17 follow its lead. Epic insists that other developers will not follow its lead because they will fear
18 “retaliation.” Dkt. 61 at 29-30. But no one will fear Apple’s response if this Court grants the
19 injunction Epic seeks and declares that all developers can flout Apple’s rules with no consequence
20 as long as they claim Apple’s rules are anticompetitive.
21 As to the equities, the balance is not close. Epic, not Apple, willfully breached multiple
22 contractual promises. Epic, not Apple, breached the trust and security that is a hallmark of the
23 iPhone ecosystem. Epic, not Apple, continues to escalate this manufactured dispute with every
24 means within its power, even after the TRO. Epic, not Apple, brought this fight. Epic, not Apple,
25 can avoid all the harm now asserted. A preliminary injunction must comport with the principles
26 and traditions of equity, yet there would be nothing equitable about rewarding Epic—and punishing
27 Apple—for conduct by Epic that was not only flagrantly wrongful but entirely unnecessary.
28

1 D. An Injunction Would Harm The Public Interest.
2 The injunction Epic seeks would severely damage the public interest. By compelling Apple
3 to continue dealing with Epic, despite Epic’s open breach of its agreement with Apple, an injunction
4 would contravene the public’s “strong interest in holding private parties to their agreements.” S.
5 Glazer’s Distribs. of Ohio, LLC v. Great Lakes Brewing Co., 860 F.3d 844, 853 (6th Cir. 2017).
6 The public interest “does not favor forcing parties to [an] agreement to conduct themselves in a
7 manner directly contrary to the express terms of the agreement.” Frank B. Hall & Co., Inc. v.
8 Alexander & Alexander, Inc., 974 F.2d 1020, 1025-26 (8th Cir. 1992); see also Goldberg v.
9 Barreca, No. 2:17-CV-2106 JCM (VCF), 2017 WL 3671292, at *8 (D. Nev. Aug. 24, 2017), aff’d,
10 720 F. App’x 877 (9th Cir. 2018). Here, the plain terms of the agreement permit Apple to terminate
11 its relationship for any reason at all. Yet the injunction Epic seeks would compel Apple to continue
12 to deal with a party that is violating the rules, thereby erasing that clear contractual right.
13 Such an injunction would harm other App Store developers—Epic’s competitors—who
14 continue to pay the contractual commissions, and would thus essentially be forced to subsidize the
15 tools that allow Epic to succeed. Epic should not be allowed to continue to engage in rule-breaking
16 while pursuing its antitrust claims, and at the same time expect other developers to follow the rules.
17 And the consequences of the requested injunction holding Apple defenseless against further
18 intrusions of secret and unauthorized code would be hugely damaging to the public, including a
19 billion iPhone users whose data could be compromised—the very third parties Apple’s rules are
20 designed to protect. As noted, Apple’s IAP provides extensive benefits to iPhone users—including
21 protections for their privacy, for the security of personal data, and parental controls that allow
22 parents to prevent their children from racking up thousands of dollars of digital transactions. By
23 preventing Apple from removing Fortnite from the App Store, the contemplated injunction would
24 put customers’ privacy and security at risk.
25 The same considerations apply with full force to Unreal Engine. If Apple is compelled to
26 continue supporting it despite Epic’s overt breach and announced intent to harm Apple on any
27 “front” possible, Epic could use Unreal Engine as a “trojan horse” to enable developers to insert
28 other unauthorized features that compromise customers’ security and privacy into apps. For

1 example, Unreal Engine could be used to steal from users, or misappropriate financial information,
2 or link to an illegal currency site for payment. Schiller Decl. ¶¶ 72, 74. In short, barring Apple from
3 enforcing the plain terms of its agreements with Epic will put Apple’s entire ecosystem and its
4 millions of users at risk for phishing scams, inappropriate content, and other security breaches. The
5 public interest favors Apple.
6 Against this background, the only public interest considerations that Epic identifies are the
7 generalized “public interest in antitrust enforcement” and “the ire of those harmed third parties—
8 Fortnite players and Unreal Engine developers.” Dkt. 61 at 25. The former point simply replicates
9 Epic’s merits argument—and fails for the same reasons. As to the latter consideration, in ruling on
10 the TRO, this Court correctly recognized that as much as Fortnite players may want the game to
11 return to the iPhone platform, their desires cannot “outweigh the general public interest in requiring
12 private parties to adhere to their contractual agreements or in resolving disputes through normal,
13 albeit expedited, proceedings.” Dkt. 48 at 7. With respect to Unreal Engine, which is used by a
14 minuscule fraction of iPhone apps, the court expressed concern about potential harm to “both third-
15 party developers and gamers.” Id. But with regard to all these groups, the power to avoid this
16 adverse impact lies entirely in Epic’s hands: The only reason third-party Fortnite players and
17 Unreal Engine developers are threatened by this commercial dispute between Epic and Apple is
18 because Epic is sacrificing them to advance its own commercial interests. And Epic’s defiance of
19 Apple’s policies has put Apple to the choice of acceding to Epic’s demands or safeguarding the
20 data and privacy of a billion customers who rely on the iPhone ecosystem. Apple’s decision to put
21 its customers first should not be counted as a point favoring Epic in the equitable calculus. The
22 public interest does not support rewarding Epic’s strategy of intentionally harming third parties to
23 gain a pecuniary advantage, to the detriment of others who follow the rules.
24 V. CONCLUSION
25 For the reasons set forth above, Apple respectfully requests that the motion for a preliminary
26 injunction be denied.
27
28

1 Dated: September 15, 2020
2 GIBSON, DUNN & CRUTCHER LLP

3
By: /s/ Theodore J. Boutrous Jr.______________
4
Theodore J. Boutrous Jr.
5 Richard J. Doren
Daniel G. Swanson
6 Mark A. Perry (pro hac vice)
Veronica S. Lewis (pro hac vice)
7 Cynthia E. Richman (pro hac vice)
Jay P. Srinivasan
8
9 ORRICK, HERRINGTON & SUTCLIFFE LLP

10
By: /s/ William F. Stute_____________________
11
E. Joshua Rosenkranz (pro hac vice pending)
12 William F. Stute (pro hac vice pending)
13
Attorneys for Defendant Apple Inc.
14
15 Attestation of Concurrence Under Local Rule 5-1(i)(3)
16 I, Theodore J. Boutrous Jr., attest pursuant to Northern District Local Rule 5-1(i)(3) that
17 concurrence in the filing of the document has been obtained from William F. Stute. I declare under
18 penalty of perjury under the laws of the United States of America that the foregoing is true and
19 correct.
20
21 Dated: September 15, 2020 By: /s/ Theodore J. Boutrous Jr.______________

Theodore J. Boutrous Jr.
22
23
24
25
26
27
28

20-09-15 Apple's Opposition To Epic Games' Motion For Preliminary Injunction

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

20-09-15 Apple's Opposition To Epic Games' Motion For Preliminary Injunction

Uploaded by

Copyright:

Available Formats

Case 4:20-cv-05640-YGR Document 73 Filed 09/15/20 Page 1 of 37

1 THEODORE J. BOUTROUS JR., E. JOSHUA ROSENKRANZ

14 VERONICA S. LEWIS (Texas Bar

APPLE’S OPPOSITION TO EPIC’S PI MOTION CASE NO. 4:20-CV-05640-YGR

APPLE’S OPPOSITION TO EPIC’S PI MOTION -i- CASE NO. 4:20-CV-05640-YGR

6 Aerotec Int’l, Inc. v. Honeywell Int’l, Inc.,

11 Apple Inc. v. Psystar Corp.,

16 Eastman Kodak Co. v. Image Tech. Servs., Inc.,

21 Garcia v. Google, Inc.,

APPLE’S OPPOSITION TO EPIC’S PI MOTION - ii - CASE NO. 4:20-CV-05640-YGR

1 It’s My Party, Inc. v. Live Nation, Inc.,

6 Milsen Co. v. Southland Corp.,

11 Ohio v. Am. Express Co.,

16 Pac. Radiation Oncology, LLC v. Queen’s Med. Ctr.,

21 Queen City Pizza, Inc. v. Domino’s Pizza, Inc.,

26 Salt Lake Trib. Publ’g Co. v. AT&T Corp.,

APPLE’S OPPOSITION TO EPIC’S PI MOTION - iii - CASE NO. 4:20-CV-05640-YGR

1 United States v. E.I. du Pont de Nemours & Co.,

6 Universal Analytics, Inc. v. MacNeal-Schwendler Corp.,

16 Apple, App Store: Principles and Practices, https://tinyurl.com/y4m7tdp5 (last

23 David S. Evans & Richard Schmalensee, Matchmakers: The New Economics of

28 Frequently Asked Questions, https://www.unrealengine.com/en-US/faq ...................................... 6

APPLE’S OPPOSITION TO EPIC’S PI MOTION - iv - CASE NO. 4:20-CV-05640-YGR

1 Google Trends, https://tinyurl.com/yxrkj4td (last visited Sept. 14, 2020) ................................... 11

4 IDC, Smartphone Market Share, https://www.idc.com/promo/smartphone-market-

APPLE’S OPPOSITION TO EPIC’S PI MOTION -v- CASE NO. 4:20-CV-05640-YGR

13 license, plus a 30% commission on digital purchases by end users.

15 expensive, benefits of Apple’s ecosystem, including continued access to Apple’s iPhone

24 can use Apple’s services without paying any commissions.

26 traditional equitable factors necessary to justify a preliminary injunction:

APPLE’S OPPOSITION TO EPIC’S PI MOTION -1- CASE NO. 4:20-CV-05640-YGR

24 this litigation continues.” Id.

APPLE’S OPPOSITION TO EPIC’S PI MOTION -2- CASE NO. 4:20-CV-05640-YGR

3 stability and integrity of the iPhone ecosystem.

19 motion for a preliminary injunction should be denied.

20 II. STATEMENT OF FACTS

10 ¶¶ 12, 36, 45.

22 etc. … is no easy task.” 4

1 created. See id.

22 content for free. See Schmalensee Decl. ¶¶ 25-27, 30.

1 B. Apple’s Developer License Agreement And App Store Guidelines Ensure

11 (for example, by installing executable code). Schiller Decl. ¶ 53.

21 cheat or conceal, thereby terminating a breaching developer’s Developer Program membership

24 respectively. Schmid Decl. ¶ 18.

APPLE’S OPPOSITION TO EPIC’S PI MOTION -9- CASE NO. 4:20-CV-05640-YGR

6 Apple developers that use a graphics engine. Id. ¶ 8.

12 developer—tremendously valuable publicity. See Grimm Decl. ¶ 7. Apple has facilitated

20 accommodate Fortnite’s holiday season marketing campaign. Id. ¶ 7.

5 marketing campaign designed to reinvigorate interest in Fortnite.

6 D. Epic Intentionally Breaches Its Agreements With Apple, Is Expelled From

8 was not properly subject to review by Apple.” Id.

APPLE’S OPPOSITION TO EPIC’S PI MOTION - 12 - CASE NO. 4:20-CV-05640-YGR

1 August 28. 13 Epic still has not done so.

4 mean that ‘irreparable harm’ exists.” Id. at 5.

16 III. LEGAL STANDARD

23 Cir. 2015) (en banc).

APPLE’S OPPOSITION TO EPIC’S PI MOTION - 14 - CASE NO. 4:20-CV-05640-YGR

7 A. Epic Will Not Succeed On The Merits Of Its Antitrust Claims.

14 improved consumer choice and welfare. 15

15 1. Epic’s monopoly maintenance claim will not succeed.

18 or maintenance of that power as distinguished from growth or development as a consequence of a

21 a. Epic’s proposed market definition is untenable.

4 “foundation” of its antitrust argument (id. at 12)—is meritless if not frivolous.