Apple defends trial judge ruling, while denying App store competes unfairly

Attorneys for Apple Inc. on Thursday defended a judge's conclusion the company was not a monopolist in its dealings with game developer Epic Games Inc. while asking an appellate court to reverse her conclusion that it competed unfairly.

The Cupertino technology giant also took on the U.S. Department of Justice and several state attorneys general, which filed briefs siding with Epic Games' appeal, by arguing they are simply trying to make it easier to pursue antitrust lawsuits.

Apple is defending U.S. District Judge Yvonne Gonzalez Rogers' September ruling against Epic Games' antitrust claims while asking the 9th U.S. Circuit Court of Appeals to reverse her decision that it violated California's unfair competition law.

In January, a 9th Circuit panel stayed the Oakland federal judge's injunction ordering Apple to loosen control of its App Store within its iOS system pending its appeal of her unfair competition ruling. Epic Games Inc. v. Apple Inc., 21-16506 (9th Cir., filed Sept. 13, 2021).

The case won't be decided until sometime in the middle of next year at the earliest, according to an Apple representative who asked not to be identified.

In its motion, Apple lawyers argued that Epic Games, best known as the developer of the Fortnite game, did not lose its antitrust claims due to a legal error but because the facts weren't in its favor.

"Epic asks this Court to second-guess the district court's factual findings that it failed to prove one or more elements of every antitrust claim it asserted," wrote Mark A. Perry, a partner with Gibson, Dunn & Crutcher LLP who represents Apple.

"That request should be rejected both because it misconceives this Court's role and because the district court's key findings are correct and amply supported," he added.

On the injunction, Perry argued Epic lacked standing to sue and also that the game developer could not prevail under California's Unfair Competition Law, or UCL, because it failed to prove any violation of antitrust law.

"This Court has held that if conduct is not anticompetitive under the antitrust laws, it is not unfair under the UCL," he wrote.

Katherine B. Forrest, a partner with Cravath, Swaine & Moore LLP who represents Epic in its 9th Circuit appeal, argued in January that Gonzalez Rogers' ruling against her client on the antitrust claims should be reversed. She cited "contractual and technological restrictions that Apple imposes to maintain its monopoly position and restrain competition."

Apple requires developers to sell digital content through their apps, charging a 30% commission on each sale, Forrest wrote.

"Epic wants to -- but cannot -- compete with Apple to fulfill that demand by providing an iPhone app store and in-app payment solution," she added.

Forrest wrote that Apple's conduct does not survive "rule of reason" scrutiny.

"The court expressly found that Apple's scheme causes great harm to competition, innovation, and consumers, yielding years of 'extraordinarily high' supracompetitive profits," she wrote.

Forrest added that Apple's justifications are "largely pretextual."

Patrick M. Kuhlmann, a U.S. Department of Justice attorney, wrote in an amicus brief that Gonzalez Rogers' definition of the Sherman Act was too narrow, though he did not say Epic Games should win its antitrust claims.

"The district court committed several legal errors that could imperil effective antitrust enforcement, especially in the digital economy," he wrote.

"The court read Sections 1 and 2 of the Sherman Act narrowly and wrongly, in ways that would leave many anticompetitive agreements and practices outside their protections," Kuhlmann added.