Written by Richard Wee and Ian Phua

Lately the internet has been flooded with the legal battle between Epic Games and Apple, what is it all about?

Epic Games Inc. “Epic”, the well known American video game software developer and publisher had filed an antitrust lawsuit against the multinational tech giant, Apple Inc.”Apple” on the 13th of August 2020 in the US District Court following the removal of Epic’s leading battle royale game —— FORTNITE from the Apple App Store for iOS devices including iPhone and iPad.

The dispute stemmed from the implementation of Epic’s own in-app payment processing system to circumvent Apple’s payment system and/or in-app purchase mechanism. One month later (8 September 2020), Apple filed several counterclaims against Epic in the antitrust lawsuit.
(read more here: https://cdn2.unrealengine.com/apple-complaint-734589783.pdf)

Recently, U.S. District Judge Yvonne Gonzalez Rogers threw out the majority of Apple’s counterclaims, saying Apple could not sue Epic Games for theft and for monetary damages. The Federal Judge narrowed the tech giant, Apple’s avenues of relief to the breach of contract claim only.

Among the lawsuits, we append a short commentary on a few legal points derived therein:

  1. In Epic’s lawsuit against Apple, the latter was sued over what Epic claims are anticompetitive and monopolistic practices that violate the US antitrust law. Epic’s main legal point is that the developer shouldn’t have to adhere to the agreement it signed with Apple because it claims that those terms cannot be enforced under US antitrust laws. Epic claims Apple has a monopoly on the iOS App Distribution Market, ensuring its consumers have no other choice where they download their apps as the Apple App Store is the only way iPhone and/or iPad users can download and/or install apps on their devices.

  2. In addition, Epic claims Apple has unlawfully fettered in-app purchases to its App Store. Developers are forced to use Apple’s in-app purchasing system if they intend to put apps on the Apple App Store and offer chargeable purchases, ensuring Apple gets a 30% cut. Epic is seeking injunctive relief to reinstate FORTNITE into the App Store and to allow fair competition in the iOS market which directly affects the consumers and third party app developers.

  3. Alternatively with regards to Apple’s counterclaim, Apple claims the developer of FORTNITE (Epic) had breached the License Agreement, by enabling an in-app payment feature and/or Direct Payment scheme with the express intent of violating the App Store guideline, particularly Section 3.1.3 of Apple’s App Store Review Guidelines which provides: “If you sell anything in your app or offer any sort of unlocked functionality, you must use Apple’s in-app payments processing exclusively”.

  4. Besides, Apple in its counterclaims argued that the introduction of the Epic Direct Payments scheme amounted to tortious “intentional interference” with prospective economic advantage and conversion as well as “unjust enrichment” for Epic. In Apple’s pleadings which state “Theft is a crime, and ‘conversion’ is its civil-law analogue”, Apple was accusing Epic for stealing money from Apple. Apple had also sought for penalties and/or monetary damages to account for the revenues lost.

  5. Recently in November, Epic has been granted a motion to dismiss the tort-based counterclaims leveled by Apple. The Federal Judge ruled that Apple’s counterclaim is only limited to the claim of breach of contract. As for the “intentional interference” claim, the Federal Judge was not convinced that Epic’s Direct Payment scheme amounted to an “independent wrongful act” separate from the core breach-of-contract.

  6. According to the U.S. District Judge Yvonne Gonzalez Roger’s statement: “This is a high-stakes breach of contract case and an antitrust case and that’s all in my view”, the Federal Judge states that this dispute should focus on Apple’s claim that Epic’s action was a breach of contract and Epic’s broader claim that Apple’s App Store is monopolistic.

The legal battle between Epic and Apple over Fortnite is now set to begin on 3rd May 2021.

 

Uploaded on 18 November 2020

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