Fortnite can remain off app store during Apple litigation

Apple does not have to allow Epic Games' massively popular Fortnite game back onto its app store if it continues to directly process in-app payments while an antitrust lawsuit against the tech giant proceeds, a federal judge ruled.

U.S. District Judge Yvonne Gonzalez Rogers found that Epic Games cannot suffer irreparable harm if the status quo is maintained because it "strategically chose" to violate its contract with Apple. She suggested the company return to complying with prior agreements over app store policies while it builds a record.

"The current predicament appears of its own making," she wrote in the Monday evening order.

Apple said in a statement it "will gladly welcome Fortnite back onto iOS" if "Epic takes the steps the judge has recommended."

"We thank the court for recognizing that Epic's problem is entirely self-inflicted and is in their power to resolve," the statement reads. "Our very first priority is making sure App Store users have a great experience in a safe and trusted environment, including iPhone users who play Fortnite and who are looking forward to the game's next season."

Epic Games and plaintiff's attorneys at Faegre Drinker Biddle & Reath LLP did not immediately return requests for comment. Epic Games, Inc. v. Apple Inc., 20-cv-05640 (N.D. Cal., filed Aug. 13, 2020).

Ruling on whether a temporary restraining order is necessary, Rogers questioned the timing of Epic Games' lawsuit against Apple.

In a significant escalation by the world's largest video game and software developers prior to filing suit, Epic secretly installed a "hotfix" to its game to allow users to pay the company directly for in-app purchases, bypassing the tech giant's standard 30% cut.

Apple immediately removed Fortnite from its app store, after which Epic Games sued and posted a protest video to its 350 million registered users mocking the iPhone maker's "1984" ad challenging International Business Machine's alleged monopoly over the computing technology market at the time.

"Epic Games has defied the App Store monopoly," the ad stated. "In retaliation, Apple is blocking Fortnite from a billion devices." Plaintiffs' attorneys argued Epic Games cannot return to the status quo since it would then be a participant in Apple's alleged scheme to maintain monopoly control over its marketplace for apps and in-app payment system, according to court filings. They also claimed the company is suffering reputational harm since Fortnite is no longer available on the app store.

While Apple's conduct over its app store might be anticompetitive, Rogers faulted Epic Games for taking a confrontational approach to the litigation. She said it made a "calculated decision" to breach allegedly illegal agreements with Apple by activating hidden code in the game to directly collect in-app payments.

"The court's evaluation is guided by the general notion that 'self-inflicted wounds are not irreparable injury,'" she wrote.

But she ruled in favor of Epic Games on claims that Apple is retaliating by planning to revoke plaintiff's access to its development program. She said it would impact users of Unreal Engine, a popular piece of software Epic Games owns that is used by developers in numerous industries that require visual effects work.

Unreal Engine is distributed by a subsidiary of Epic Games and operates under a separate contract with Apple. The ban was scheduled to go into effect Aug. 28.

Rogers said it could be too late to save all the projects by third-party developers relying on the software that would be shelved while it's unavailable, further complicating the litigation.

"Not only has the underlying agreement not been breached, but the economy is in dire need of increasing avenues for creativity and innovation, not eliminating them," she wrote. "Epic Games and Apple are at liberty to litigate against each other, but their dispute should not create havoc to bystanders."

Rogers will consider issuing a preliminary injunction at a Sept. 28 hearing.

In an identical complaint also filed in the Northern District of California, Epic Games challenged Google's alleged anticompetitive conduct over its marketplace for apps and in-app payment system. The lawsuit is slightly different with respect to allegations over its play store since the Alphabet-owned company allows users to download app stores or apps directly from developers' websites. Epic Games, Inc. v. Google LLC, 20-cv-05671 (N.D. Cal., filed Aug. 13, 2020).

Epic Games does not seek monetary damages in either of its lawsuits.