Fortnite on iPad Mini 5Source: iMore

What you need to know

  • The first major ruling in the Epic vs. Apple case has come down.
  • It was essentially a split decision.
  • Fortnite remains banned from the App Store for now, but Apple cannot take further action against the Unreal Engine and other Epic properties.

Judge Yvonne Gonzalez Rogers has granted a motion in part from Epic Games requesting a temporary restraining order against Apple to protect its Unreal Engine and developer accounts.

A hearing was held via Zoom Monday to determine the merits of a request from Epic Games to grant a temporary restraining order against Apple, which Judge Gonzalez Rogers granted in part and denied in part.

Fortnite still banned

The ruling stated "Epic Games strategically chose to breach its agreements with Apple which changed the status quo" regarding adding a new payment method to the game that breached Apple's App Store rule. The judge stated that she recognized based on the response of Fortnite players to the ban that its supporters were passionate, and "eagerly anticipate its return to the iOS platform." However, she said that none of this was enough to "outweigh the general public interest in requiring private parties to adhere to their contractual agreements or in resolving business disputes through normal, albeit expedited, proceedings." Fortnite remains banned from Apple's App Store.

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Hands off the Unreal Engine

Judge Gonzalez Rogers did, however, agree that Apple's wider attack on Epic Games' developer accounts and the Unreal Engine could cause "potential significant damage to both the Unreal Engine platform itself, and to the gaming industry generally, including on both third-party developers and gamers." She further noted that whilst Apple and Epic were free to fight each other in court, the dispute "should not create havoc to bystanders" in the meantime. As such, effective immediately, Apple is temporarily restrained from " restricting, suspending, or terminating any affiliate of Epic Games, such as Epic International, from Apple's Developer Program, including as to Unreal Engine." **This means that for now, the Unreal Engine and other Epic Games' properties beyond Fortnite are safe. **

Analysis

Lawyers on both sides duked it out for around 90 minutes via Zoom yesterday, in the first courtroom (albeit virtual) confrontation of what could be a landmark lawsuit between the two. Judge Gonzalez Rogers made some telling comments, which could give us some key insight into how the case could play out.

As per Sarah Jeong's extremely comprehensive commentary on the hearing, Gonzalez Rogers noted a few facts in outlining her decision:

  1. Epic brought the Fortnite ban upon itself - as Apple argued in filings and statements, the court was clear that Fortnite's ban was Epic's own doing. Judge Gonzalez Rogers noting, "in my view, you cannot have irreparable harm when you create the harm yourself." She further clarified that all Epic had to do was "take out the [hotfix]" and then the case could proceed to trial. The ruling notes "the Court observes that Epic Games strategically chose to breach its agreements with Apple which changed the status quo." This is why the Fortnite ban was upheld. 2.Targeting the Unreal Engine was an overreach - Judge Gonzalez rogers noted that Apple's retaliation against Epic Games "seems like an overreach", noting that Epic interacts with Apple and the App Store using two separate companies. The ruling again notes that there was "potential significant damage to both the Unreal engine platform" and the gaming industry in general which could affect many third-party developers as well of games.
  2. A tale of two companies - much discussion was made of Epic's two companies, Epic Games Inc. and Epic Games International S.a.r.l. As FOSS patents notes:

Formally, Epic Games, Inc. (a U.S. corporation) and Epic Games International S.à.r.l. (a Swiss corporation) are separate legal entities. But Gibson Dunn's Richard Doren argued on Apple's behalf that the same individuals manage the accounts, the developer fees are paid with the same credit card for both contracts, and Apple always terminates contracts of affiliate entities when a major breach occurs because otherwise a certain type of non-compliance (here, in the form of offering alternative payment methods) "would spread like a virus."

Apple's lawyers also argued that if the two companies really were separate, then there were no grounds to grant a TRO in favor of the second company, as Epic had not made any filings on its behalf. Epic insisted that the two companies were not affiliated and that there were independent contracts between the two.

  1. The wider case - Judge Gonzalez Rogers, looking ahead slightly, noted that there was evidence "that everyone who is using these platforms to sell these kinds of games is charging 30%." It is likely moving forward that Apple will argue its 30% App Store cut is standard industry practice and will point to other companies like Google as proof.
  2. Competition - again giving us a glimpse forward, the Judge asked Apple where, without competition, 30% had come from if you couldn't buy an iOS app from anyone except Apple. She also noted "theories about the cost of people to switch" from iOS to Android. Apple's lawyers responded that at a later stage it will be able to prove that people make this switch all the time.
  3. Likelihood of success - the ruling in this early hearing notes that regarding the merits of the wider case "Epic has met the high burden of demonstrating a likelihood of success on the merits, especially in the antitrust context," however it does concede that "serious questions do exist" regarding the App Store and Apple policy.

A new deadline in the case was set for September 4, by which time a motion for a preliminary injunction is to be filed. Following responses and such, a hearing will be held on this matter on Monday, September 28, 2020, at 9:30 am PDT, again via Zoom. The same issues discussed at Monday's hearing will again be examined, where a judge will make a decision regarding a more permanent decision on this specific matter. There is a possibility that a judge could reverse either or both decisions made Monday, meaning the next hearing could see Fortnite reinstated on the App Store, or Apple's action against the Unreal Engine given the greenlight. It is quite likely (but not certain) the judge will stick with her initial ruling as per yesterday's hearing.

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