Apple’s IAP or “in-app purchasing” system is a collection of software programs working together to perform several functions at once in the specific context of a transaction on a digital device. Apple uses the system to manage transactions, payments, and commissions within the App Store, but it also uses the system in other “stores” on iOS devices, such as “the iTunes Store on iOS, Apple Music, iCloud or Cloud services” and “physical retail stores”.325 The system is not something that is bought or sold.
IAP is not integrated into the App Store itself, even though it is integrated into an iOS device.326 By “integrated,” the Court only means that the application has been engineered specifically to work seamlessly on the device. Neither side focused on the engineering to find otherwise.
More specifically, Apple’s IAP, as used here, is a secured system which tracks and verifies digital purchases, then determines and collects the appropriate commission on those transactions. In this regard, the system records all digital sales by identifying the customer and their payment methods, tracking and accumulating transactions; and conducts fraud-related checks. IAP simultaneously provides information to consumers so that they can view their purchase history, share subscriptions with family members and across devices, manage spending by implementing parental controls, and challenge and restore purchases.
Apple also intends the system to provide the customer with a single interface which can be used, and trusted, with respect to all purchases regardless of the developer. Importantly, the system has become more sophisticated over time, but the record does not detail the various
versions. Notably the IAP system requires developers to independently verify delivery of in- app purchasing content; it cannot verify that kind of delivery itself.
With respect to the commission and the transfer of money between a developer and both Apple and the consumer, Apple engages third-party payment processors.329 Given the volume of transactions at issue, Apple pays those processors somewhere in the range of one to two percent.
The Court agrees that simple payment processing can occur outside of IAP and plaintiff points to examples of this happening in 2009. 331 However, those examples only concern simple payment processing, not all the functionality outlined in the preceding paragraph, including the functionality to ensure Apple received its commission. Nor do the examples show that Apple was waiving its commission for those developers. Rather, in December 2008, the product was new, so, by definition, in flux.
Epic Games ignores this other functionality to argue that Apple merely “matches” developers to consumers; a “matching” service.332 This statement is partially true, but Apple has never argued that it levies a commission merely because it matches the developers with the customers. Apple argues that it uses this model to monetize its intellectual property against the entire suite of functions as well as to pay for the 80% of all apps which are free and generate no direct revenue stream from the developers other than the annual $99.00 developer fee.
Creating a seamless system to manage all its e-commerce was not an insignificant feat. Further, expanding it to address the scale of the growth required a substantial investment, not to
mention the constant upgrading of the cellphones to allow for more sophisticated apps.333 Under current e-commerce models, even plaintiff’s expert conceded that similar functionalities for other digital companies were not separate products.334 Under all models, Apple would be entitled to a commission or licensing fee, even if IAP was optional.335 Payment processors have the ability to provide only one piece of the functionality. There is no evidence that they can provide the balance. Thus, the Court finds Epic Games has not shown that IAP is a separate and distinct product.336
