Judge in Apple v. Epic Case Sides With Apple on Fortnite and Epic on Unreal Engine [Updated]
Apple last week sent a letter to Epic Games letting the company know that if it does not comply with the App Store rules and remove direct payment options from Fortnite, that all of Epic's developer accounts and access to Apple development tools will be terminated on August 28.
That would impact Fortnite, other Epic Games, and the Unreal Engine used by third-party developers. Epic in response asked a Northern California court to stop Apple from ending Epic's App Store access with a temporary restraining order (TRO), and there was a court hearing on the matter today.
Right when the hearing kicked off, Judge Yvonne Gonzalez Rogers, who is overseeing the case, said that she was inclined to not grant relief with respect to games (including Fortnite), but that she was inclined to grant relief with respect to the Unreal Engine used by third-party developers. Rogers said that Epic created the current situation with Fortnite and could undo it by reverting to the status quo, so if her initial opinion is any indication of the outcome, we could see a restraining order that blocks Apple from restricting access to the Unreal Engine, but permits Apple to terminate the Epic Games developer account.
Your client created the situation. Your client doesn't come to this court with clean hands. Epic made a strategically and calculated move to breach, and decided to breach right before a new season. So in my view, you cannot have irreparable harm when you create a harm yourself.
All Epic has to do is take it back to the status quo and no one suffers any harm. And you can have a trial date in the spring. Flip the switch to the way it was August 3rd and return everybody back to where they were.
Lawyers for Epic and Apple were both able to argue their positions, and given the initial inclinations of the judge, Epic largely focused on arguing why its games should be able to remain in the App Store without changes, while Apple focused on reasons why it should be able to block the Unreal Engine.
Epic's lawyer's argued that asking Epic to capitulate and go back to the status quo is akin to "asking us to require consumers to pay more than they should in a competitive environment" and that it had antitrust implications. "We can't go back into an anticompetitive contract," said Epic's lawyer. Epic also argued about the social aspects of the game, suggesting it was more than a mere game and a vital way to communicate during the pandemic.
Apple's lawyer argued that if Fortnite and other games are blocked from the App Store but development of the Unreal Engine is allowed to continue, Epic could just transfer its bad behavior to other entities. Apple also focused on potential harm to users and the need to enforce contracts, claiming that Epic broke Apple's App Store model, profited by it, and "placed customers in the middle." The judge said that it sounded like Apple was overreaching because Apple has separate contracts with Epic Games and Epic International for the Unreal Engine and one should not impact the other.
The contract with Epic International has not been breached. Apple reached beyond its one contract with Epic Games and is using its hard leverage. It's slammed Epic Games with this additional penalty. It does to me look retaliatory. I don't see any harm to Apple to restrain you from not impacting the Unreal Engine on that platform or the developer's engine. It looks like overreach to me.
Epic argued that the Unreal Engine would be "destroyed" if it's blocked on Apple's platforms because developers use it for cross platform development. Epic's lawyers said that Epic has already heard from developers who are abandoning the Unreal Engine due to Apple's threat. Apple's lawyer in turn said that everything would be resolved if Epic falls in line with the App Store rules and eliminates the direct payment option in Fortnite.
Toward the end of the meeting, the judge said that the battle isn't going to be won or lost with a temporary restraining order, as there is a long legal fight to come, and it's not a "slam dunk" for either company.
There's some measure of a lack of competition and high barriers to market entry. That said, there appears to be evidence that everyone that uses these kind of platforms to sell games is charging 30%. Whether Epic likes it, the industry and not just Apple seem to be charging that. Right now, Epic is paying Apple nothing. Epic itself charges third parties. This battle won't be won or lost on a TRO, and Apple has a reputation of going the distance so it's not surprising they acted the way they did here, but like I said, they overreached.
The judge plans to provide a ruling on the issue in the near future, letting Apple and Epic know whether Apple will be allowed to block Epic from all developer tools and accounts, or whether a temporary restraining order will prevent the Cupertino company from doing so.
Update: The judge overseeing the Apple v. Epic battle has granted a temporary restraining order that will prevent Apple blocking Epic's access to development tools for the Unreal Engine. The judge will not prevent Apple from terminating the Epic Games developer account, which will prevent Fortnite from being updated until Epic complies with the App Store rules.
Epic was unable to demonstrate that Apple's blocking of Fortnite will case irreparable harm as, as the ruling says, "the current predicament appears of [Epic's] own making." Epic was, however, able to demonstrate a "preliminary showing of irreparable harm" related to the revocation of Apple's developer tools for the Unreal Engine.
The judge points out that Epic International, separate from Epic Games, is responsible for the Unreal Engine development, and Epic International has "separate developer program license agreements with Apple and those agreements have not been breached." Apple had argued that it routinely terminates agreements for all linked developer accounts, which it will not be able to do in this case. From the ruling:
Thus, in focusing on the status quo, the Court observes that Epic Games strategically chose to breach its agreements with Apple which changed the status quo. No equities have been identified suggesting that the Court should impose a new status quo in favor of Epic Games. By contrast, with respect to the Unreal Engine and the developer tools, the Court finds the opposite result. In this regard, the contracts related to those applications were not breached. Apple does not persuade that it will be harmed based on any restraint on removing the developer tools. The parties' dispute is easily cabined on the antitrust allegations with respect to the App Store. It need not go farther. Apple has chosen to act severely, and by doing so, has impacted non-parties, and a third-party developer ecosystem. In this regard, the equities do weigh against Apple.
Under the terms of the ruling, Apple is temporarily restrained from taking adverse action against Epic Games with respect to restricting, suspending, or terminating any affiliate of Epic Games, such as Epic International, from Apple's Developer Program, which mean Epic can continue to work on and distribute the Unreal Engine. The restraining order goes into effect immediately and will remain in force until the court issues an order on the motion for preliminary injunction.
The hearing for the preliminary injunction is set to take place on Monday, September 28, 2020.
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