Epic’s late request to call rebuttal witnesses against Apple denied

The federal judge overseeing Epic Games' antitrust court battle against Apple rejected a last-minute request by Epic on Thursday to call rebuttal witnesses in response to testimony from an Apple executive.

The dispute relates to a disagreement on whether users could make purchases inside of apps before the formal introduction of Apple's in-app purchasing system. Epic attorney Katherine Forrest called it "a critical issue in this case."

Apple attorney Richard Doren accused Epic of being "intentionally and provocatively" late in an effort to sabotage the defense. "This is sandbagging, pure and simple," he said.

The exchange came as the trial before U.S. District Judge Yvonne Gonzalez Rogers over Apple's 30% commission on all transactions made inside of apps and other payment processing restrictions nears its end. Epic Games v. Apple Inc., 20-cv-05640 (N.D. Cal., filed Aug. 13, 2020).

Phil Schiller, who oversees the App Store and was involved in the conception of Apple's core products, gave extensive testimony during the trial's third week on the creation of the App Store and the motives behind the policies that govern it. He testified on Tuesday that Apple rolled out for the first time in 2009 the ability for developers to offer in-app purchases to users.

Epic moved Thursday to offer two additional expert witnesses or provide documents to contest Schiller's testimony on when commerce opportunities inside of apps became available. It argued that Apple's payment processor increased costs on developers if they could offer in-app purchases before Apple launched the feature because they then became subject to a 30% commission on those transactions.

Doren said that Epic had its chance to call experts and put documents into the record. "Now is not the time for them to kick this door open," the Gibson, Dunn & Crutcher LLP partner said.

Forrest, a partner at Cravath Swaine & Moore LLP and former federal judge, said it "came as a surprise that [Schiller] would deny" what Epic thought of as an "obvious point."

"If it's so critical, you should've been prepared for it," Rogers responded, denying Epic's bid. "Clearly, you knew it was an issue."

During direct testimony, James Malackowski, founder of intellectual property firm Ocean Tomo, said that Apple has invested in excess of $101 billion in research and development since 2005. This "significant and sustained commitment" to innovation, he said, has benefited consumers and developers.

Not only has the number of apps downloaded on the App Store jumped from 25 billion in 2012 to 180 billion in 2020, Malackowski testified that the quality of those apps and the features they can incorporate have vastly improved using Apple's intellectual property.

Malackowski said that Epic has made substantial use of Apple's software. He pointed to a patent that minimizes battery consumption for graphics on the Epic game Fortnite.

Epic's request for a "store within a store" would violate Apple's intellectual property rights through a "compulsory license," he said. He testified that Epic is asking to violate "fundamental, constitutionally protected rights to your innovation," which would discourage the incentive to invest in innovation.

Epic attorney Lauren Moskowitz of Cravath Swaine & Moore LLP grilled Malackowski on his testimony being stricken in several cases. In six instances, she said judges found his expert opinion to be "unreliable," "improper" and "methodologically flawed."

The judge overseeing Google's lawsuit against Oracle, she said, found his testimony to be "contrary to the facts."

Aviel Rubin, professor of computer science at Johns Hopkins University, testified next on the superior security of iPhones compared to devices from Apple's competitors. He concluded that policies that govern the App Store, particularly the human app review process and centralized app distribution, offer "significant security benefits" and "result in lower infection rates on phones as well as a low volume of malicious and untrustworthy apps."

Less than 2% of iPhones in 2020 were infected with malware compared to 26% of phones running the Android operating system, according to a report from Nokia on phone security that Rubin analyzed.

"The fact that Android applications can be downloaded from just about anywhere still represents a huge problem, as users are free to download apps from third-party app stores, where many of the applications, while functional, are Trojanized," the report stated.

Referencing another security report from RiskIQ that analyzed 2 billion apps, Rubin testified that Google app stores had the most apps known to be malicious, with roughly 10,200.

"Apple treats its app store like Fort Knox and rarely hosts dangerous apps," the report stated. "Google Play's reputation in this regard is not as good."

The trial will resume on Friday with Apple chief executive Tim Cook taking the stand.