Epic Games Denied Preliminary Injunction for Fortnite, But Apple Can't Block Unreal Engine

[31 Flavas]

It is this that has me scratching my head. How is claiming McDonalds has a "monopoly" on selling McRib any different then the nonsense Epic is claiming regarding Apple and iOS? The first is nonsensical but the second isn't. How in the name of sanity does that freaking work?!

Well, it's easier to understand when you realize that Epic and critics don't care. I mean, for some it maybe coming from a sort of altruistic "Why wouldn't you want more control over your iPhone?" viewpoint - but, they're not going to care that the iOS "market place" or whatever could be or is as profitable or successful because of Apple's control.

This isn't to say that Apple is completely without fault. To that point, Epic's stronger arguments are over consistency in application of rules in app review and equal application of requirements or limitations. For example, why isn't YouTube in trouble, why doesn't their app get pulled and banned, for disabling the Picture-in-Picture, a core system functionality, in iOS 14? Why does Netflix get approved as "viewer app" (meaning they don't have to offer IAP subscriptions, at all) and the "Hey!" email app doesn't. Also, yea xMicrosoft's xBox xCloud xGame xStreaming xApp being denied - likely because it conflicts with Apple Arcade.

But, at the heart, Epic's case isn't about what is beneficial for consumers. It's only about what is beneficial for them. This is why Epic makes up an excuse to let video game consoles such as Playstation, Xbox, and Nintendo's systems off the hook. Even though, they'd stand to raise way more by not having to pay Nintendo, Sony, and Microsoft their own 30% cut.

 

[Carnegie]

You know that's defining a market size of one (1), right? If you want to say a "market" can be an individual brand or product - then *all* brands or products are monopolies to themselves. e.g. Maybe you own a successful retail or online store. Well, now your brand and store(s) are monopolies by themselves. So, you're going to have to allow me and anyone else, free of charge, to use part of your store for selling our own goods. Maybe you're a family owned store and don't want to sell vapes, tobacco, pot, porn, sex toys, political or hateful items - well, sucks to be you. I get my own store independent of yours, inside of your own, because you have a monopoly on the people that visit your store. You can't dictate what I sell or even get a percentage of sales.

The reality will mean that, yea, Epic has a monopoly on the people who pay for emotes or outfits (probably even, v-bucks) in the Fortnite app / market place. Maybe, possibly, Epic can be the monopoly provider of v-bucks. But, I don't have to accept v-bucks since I'll be able to have my own IAP for my items. Epic on their own may have a rule that they'll only sell cosmetic stuff for Fortnite, but guess what.... I get to have my own store with my own rules, that aren't subject to Epic's whim, so I can sell weapons or stat boosts or anything I want because Epic can't have a monopoly on their product.

How is this better for the consumer? They'll now have to deal with multiple accounts and probably multiple currencies form the different vendors selling IAP which may break the game because they don't have to respect Epic's terms or conditions or restrictions.

No, saying that a single brand can constitute a relevant antitrust market in itself doesn't mean that all single brands are relevant antitrust markets in themselves. Saying that a police officer can be a murderer doesn't mean that all police officers are murderers. It depends on the specifics of various situations. That's how antitrust market definition works; it depends on the specifics of the relevant situations.

Whether we agree or not, courts - to include the Supreme Court - have said that single brands of products or services can, in themselves, constitute relevant antitrust markets. It wouldn't be common. The bar is pretty high and it requires less-than-typical circumstances. But it can be the case and Apple's situation with the App Store is one where it's plausible that it could be considered to have market power in an antitrust market defined as iOS app distribution. The determination will be highly fact dependent.

If you want to discuss the case law or, more generally, how antitrust market definition works, we can do that.

 

[Carnegie]

It is this that has me scratching my head. How is claiming McDonalds has a "monopoly" on selling McRib any different then the nonsense Epic is claiming regarding Apple and iOS? The first is nonsensical but the second isn't. How in the name of sanity does that freaking work?!

More over since come the ARM macs iOS programs can run along side most Intel Mac programs (a few won't run) which can be downloaded by other providers such as Steam, Origin, and literally hundreds of individual sites.

Because all situations aren't the same. Not every instance of swinging a bat is a crime, even though some instances are. There are factors which go into determining whether something is assault (or, e.g., attempted murder). Based on those factors, one bat swing might be assault (or, e.g., attempted murder) whereas most others aren't.

There are factors that go into the determination of whether a given specified market is a relevant antitrust market. The facts of McDonald's situation are quite different than those of Apple's situation, as concerns the App Store. And based on those differences, one could be considered an antitrust market while the other wasn't.

We can talk about those factors and how they might weigh in Apple's situation if you'd like.

 

[31 Flavas]

Because all situations aren't the same. Not every instance of swinging a bat is a crime, even though some instances are. There are factors which go into determining whether something is assault (or, e.g., attempted murder). Based on those factors, one bat swing might be assault (or, e.g., attempted murder) whereas most others aren't.

Right, but we don't disagree that what Apple is doing - locking out all competing "App Stores" isn't unique, right? The argument I see being made is that Apple's mobile products should be treated the same as, Mac computer products. i.e. Phones are general purpose compute products. Therefore, they shouldn't be able to restrict App markets. What I'd like to understand, from a critics, is how the dedicated Sony PS 4/5, Microsoft's xBoxes, and Nintendo's devices differ. These are literal PCs that instead have just been locked down. The newest ones will be running literal AMD CPUs and GPUs. In the preliminary injunction - the judge isn't buying Epic's lame excuse to exempt consoles as "not the same". If you've read that, I'd like to know what your disagreement with it is.

All that I see happening here is Apple is being singled out. And critics don't care about details. It's just 30% is too much, monopolies are wrong period, etc. And, honestly, that's fine. It's their opinion. But, that's why we have judges to look at both sides of the arguments.

 

[cmaier]

No, saying that a single brand can constitute a relevant antitrust market in itself doesn't mean that all single brands are relevant antitrust markets in themselves. Saying that a police officer can be a murderer doesn't mean that all police officers are murderers.

But are all fingers thumbs? I always get that confused.

 

[31 Flavas]

Whether we agree or not, courts - to include the Supreme Court - have said that single brands of products or services can, in themselves, constitute relevant antitrust markets.

If single product or single brand markets have been previously been declared and adjudicated as illegal monopolies, as you mention, up to the Supreme Court, would you kindly cite the particular brand / product or the particular case? Neither Epic nor Apple have referenced, such to my knowledge.

In particular, neither does the preliminary judgement, page 10 from lines 3 to 6 state, "As the parties acknowledge, this matter presents questions at the frontier edges of antitrust law in the United States. Simply put, no analogous authority exists. The questions and issues raised in this litigation concern novel and innovative business practices in the technology market that have not otherwise been the subject of antitrust litigation."

It wouldn't be common. The bar is pretty high and it requires less-than-typical circumstances. But it can be the case and Apple's situation with the App Store is one where it's plausible that it could be considered to have market power in an antitrust market defined as iOS app distribution. The determination will be highly fact dependent.

There are serious questions - however, which ones are weak and which are strong, I guess will just differ between us.

If you want to discuss the case law or, more generally, how antitrust market definition works, we can do that.

If you are familiar with particular case law either by practice or by hobby or interest, I'm curious to know if you can find or disprove the existence of particular prior adjudication from the late 70's, early 80's. Cases involving Atari and Activision. That I understand, the two had a precedence setting case or series of cases, that established the underlying need for our modern day code signing and code lockout systems. However, using google doesn't bring up any solid history - more so - it isn't mentioned by either Apple, Epic, or the court, so it now that I think of it probably just some bogus wives tale sort of story.

Best I can pull up is: The History of Video Game Lawsuits - MyGamingmygaming.co.za which mentions the popularity of Activision games, how that didn't please Atari, and lead to a lawsuit where, as I mention later - the legitimacy of 3rd party development being established.

Anyway, story goes that Activision was formed from ex-Atari game developers that 1) understood they could make way more money developing and selling games themselves, then for Atari and 2) Were unhappy that Atari refused to credit the game developers either on the game box, in the games manual, or allow for in-game credits.

Atari wanted to claim complete ownership of the Atari system software development. Therefore, Atari sued Activision more or less for operating an illegal business and / or theft of the company secrets, company IP, the knowledge of how to program for the Atari hardware. The case (or cases) were decided against Atari. The court excoriated Atari and ruled that Atari had no control past the first sale of the hardware and, otherwise, only maintained IP on games and software developed by employees, on company time. Since the Atari 2600 systems would allow arbitrary code execution, that was it. Atari had no control over software development. If someone could figure out how to code for the hardware, Atari otherwise could not prohibit the sale of it, limit game content, nor could they require revenue sharing, a licensing fee.

Case more or less established the legitimacy of 3rd party software development, in the first place. The decision, however, did provide Atari one caveat - they could control, limit, or require licensing - provided they develop a method to lockout code execution.

But the 2600, was metaphorically set in stone. The 2600 was open season - and game development took off and then spectacularly crashed in '83/'84. When video gaming returned to the market with Nintendo - Nintendo had a patented pair of microcontrollers, lockout chips. The code of whom was copyright protected so only they could produce them and could sue anyone that duplicated them. The "lock" and "key" chips were used to enforce licensing agreements, fee structures, and "game quality". And so, it goes, this started the single product (or brand, in Apple's case) monopoly markets that we have today.

 

[Maximara]

Sometimes, the way people talk about this fiasco almost has me convinced that I was the only person who ever bothered to load up Fortnite on his Mac. That is to say: like the iOS version of Fortnite, the Mac version has also been un-updatable since Epic got their accounts shutdown by Apple... but hardly anyone really talks about that. Weird.

(And yes, I know I can just bootcamp it -- but that's sidestepping the point.)

As I said before boot camping (Intel Windows) is going to formally start dying with the new ARM Macs. We may seen Windows boot camping again but it will be ARM windows not Intel.

 

[Carnegie]

If single product or single brand markets have been previously been declared and adjudicated as illegal monopolies, as you mention, up to the Supreme Court, would you kindly cite the particular brand / product or the particular case? Neither Epic nor Apple have referenced, such to my knowledge.

In particular, neither does the preliminary judgement, page 10 from lines 3 to 6 state, "As the parties acknowledge, this matter presents questions at the frontier edges of antitrust law in the United States. Simply put, no analogous authority exists. The questions and issues raised in this litigation concern novel and innovative business practices in the technology market that have not otherwise been the subject of antitrust litigation."

There are serious questions - however, which ones are weak and which are strong, I guess will just differ between us.

If you are familiar with particular case law either by practice or by hobby or interest, I'm curious to know if you can find or disprove the existence of particular prior adjudication from the late 70's, early 80's. Cases involving Atari and Activision. That I understand, the two had a precedence setting case or series of cases, that established the underlying need for our modern day code signing and code lockout systems. However, using google doesn't bring up any solid history - more so - it isn't mentioned by either Apple, Epic, or the court, so it now that I think of it probably just some bogus wives tale sort of story.

Best I can pull up is: The History of Video Game Lawsuits - MyGamingmygaming.co.za which mentions the popularity of Activision games, how that didn't please Atari, and lead to a lawsuit where, as I mention later - the legitimacy of 3rd party development being established.

Anyway, story goes that Activision was formed from ex-Atari game developers that 1) understood they could make way more money developing and selling games themselves, then for Atari and 2) Were unhappy that Atari refused to credit the game developers either on the game box, in the games manual, or allow for in-game credits.

Atari wanted to claim complete ownership of the Atari system software development. Therefore, Atari sued Activision more or less for operating an illegal business and / or theft of the company secrets, company IP, the knowledge of how to program for the Atari hardware. The case (or cases) were decided against Atari. The court excoriated Atari and ruled that Atari had no control past the first sale of the hardware and, otherwise, only maintained IP on games and software developed by employees, on company time. Since the Atari 2600 systems would allow arbitrary code execution, that was it. Atari had no control over software development. If someone could figure out how to code for the hardware, Atari otherwise could not prohibit the sale of it, limit game content, nor could they require revenue sharing, a licensing fee.

Case more or less established the legitimacy of 3rd party software development, in the first place. The decision, however, did provide Atari one caveat - they could control, limit, or require licensing - provided they develop a method to lockout code execution.

But the 2600, was metaphorically set in stone. The 2600 was open season - and game development took off and then spectacularly crashed in '83/'84. When video gaming returned to the market with Nintendo - Nintendo had a patented pair of microcontrollers, lockout chips. The code of whom was copyright protected so only they could produce them and could sue anyone that duplicated them. The "lock" and "key" chips were used to enforce licensing agreements, fee structures, and "game quality". And so, it goes, this started the single product (or brand, in Apple's case) monopoly markets that we have today.

The most noteworthy case is Eastman Kodak v Image Technical Services (1992). It's cited by both Epic and Apple, and by Judge Rogers in her order granting in part and denying in part Epic's motion for preliminary injunction. In that case the Supreme Court said (citations omitted):

Kodak also contends that, as a matter of law, a single brand of a product or service can never be a relevant market under the Sherman Act. We disagree. The relevant market for antitrust purposes is determined by the choices available to Kodak equipment owners. Because service and parts for Kodak equipment are not interchangeable with other manufacturers' service and parts, the relevant market from the Kodak-equipment owner's perspective is composed of only those companies that service Kodak machines. This Court's prior cases support the proposition that in some instances one brand of a product can constitute a separate market. The proper market definition in this case can be determined only after a factual inquiry into the "commercial realities" faced by consumers.

I won't get deep into the reasoning in Eastman Kodak. But one key takeaway, as relevant here, is the Court's acknowledgement that competition in a primary market (e.g. copiers or smartphones) doesn't necessarily - for various reasons - serve to discipline a primary market participant's actions or pricing in an aftermarket (e.g. copier parts or app distribution). In other words, a lack of market power in an aftermarket doesn't necessarily follow from a lack of market power in the primary market. Thus, an aftermarket - even one comprised of a single brand of products or services - can constitute its own relevant market for antitrust law purposes.

As the Ninth Circuit said in Newcal Industries v Ikon Office Solutions (2008), “[c]ompetition in the initial market, therefore, does not necessarily suffice to discipline anticompetitive practices in the aftermarket."

As for your quote from Judge Rogers order... yes, this case presents some new (or new-ish) questions. But whether it's possible for a single brand of products or services to, in itself, make up a relevant antitrust market isn't one of them. That question has been answered. As relevant in this case, the question is whether iOS app distribution or iOS in-app payment processing is such a relevant antitrust market.

As for the Atari / Activision situation, I'm vaguely familiar with it. I watched a documentary about Atari's founding not too long ago that touched on that subject. But I'm not at all sure what the court had to say about the situation. At any rate, I don't think that situation is particularly relevant to the issue we're discussing here. It is, of course, true that parties can have IP rights which they can legally enforce to exclude some kinds of competition from others. IP rights give parties legal monopolies. But it's also true that, in some circumstances, the nature of those monopolies and how the IP owners wield their IP rights can be the bases of antitrust violations.

 

[Carnegie]

But are all fingers thumbs? I always get that confused.

Yes, sometimes I feel like I'm all thumbs.

Wait. Did that answer the question?

 

[31 Flavas]

As for the Atari / Activision situation, I'm vaguely familiar with it. I watched a documentary about Atari's founding not too long ago that touched on that subject. But I'm not at all sure what the court had to say about the situation. At any rate, I don't think that situation is particularly relevant to the issue we're discussing here. It is, of course, true that parties can have IP rights which they can legally enforce to exclude some kinds of competition from others. IP rights give parties legal monopolies. But it's also true that, in some circumstances, the nature of those monopolies and how the IP owners wield their IP rights can be the bases of antitrust violations.

I think it is particularly relevant. If the litigation between Atari and Activision did indeed establish (at least, the US market) that lockout systems were necessary if hardware manufacturers wanted to have control over software development - then is this "aftermarket" that Epic is trying to argue exists isn't just a malicious creation of Apple's own anti-competitive design. Rather, it's existence derives from a mandate from the court.

 

[cmaier]

I think it is particularly relevant. If the litigation between Atari and Activision did indeed establish (at least, the US market) that lockout systems were necessary if hardware manufacturers wanted to have control over software development - then is this "aftermarket" that Epic is trying to argue exists isn't just a malicious creation of Apple's own anti-competitive design. Rather, it's existence derives from a mandate from the court.

No, the court in Atari/Activision did not mandate that anyone use lock-out systems.

 

[31 Flavas]

No, the court in Atari/Activision did not mandate that anyone use lock-out systems.

So for 35 years or so, everyone has just accepted, or at least not questioned, the lockout systems which give Nintendo, Sony, Microsoft (and previously Sega...) complete monopolistic control to subjugate 3rd party publishers and developers? They've just been allowed to exist on no ones authority except the hardware manufacurers? I have to think their persistence is owed to more then either ignorance or I guess a collective shrugging of the shoulders.

Tengen and others worked to circumvent them, but their actions were litigated and halted. Or to maybe put it another way the NES lockout system was upheld as a valid control system.

(Hm... Well, now that I think of Tengen, i have maybe a different or maybe better lead to follow.)

Anyway, I have to believe that if it wasn't Atari v Activision then lockout systems and respectively, Apple's own modern cryptographic system, are validated or their existence derived from some litigation.

 

[cmaier]

So for 35 years or so, everyone has just accepted, or at least not questioned, the lockout systems which give Nintendo, Sony, Microsoft (and previously Sega...) complete monopolistic control to subjugate 3rd party publishers and developers? They've just been allowed to exist on no ones authority except the hardware manufacurers? I have to think their persistence is owed to more then either ignorance or I guess a collective shrugging of the shoulders.

Tengen and others worked to circumvent them, but their actions were litigated and halted. Or to put it another way their existence was upheld.

(Hm... Well, now that I think of Tengen, i have maybe a different or maybe better lead to follow.)

Anyway, I have to believe that if it wasn't Atari v Activision then lockout systems and respectively, Apple's own modern cryptographic system, are validated or their existence derived from some litigation.

Believe it or not, the way it works is that, unless there is a statute that says you cannot do something, then you are allowed to do that thing until a court says otherwise.

Since no law is implicated by encrypting bootloaders and requiring apps to be digitally signed before executing them, what makes you think anybody is waiting for a court to tell them they are required to do it?

As for tengen, they infringed a copyright.

 

[31 Flavas]

As for tengen, they infringed a copyright.

Correct me if wrong, but it wasn't because Tengen wanted to profit off of the copyright work that was 10NES / the CIC lockout chip. They weren't using it to "protect" their own games. That is, they were working around the CIC itself. I find it incredulous that as a defense, Tengen (or anyone else) wouldn't have challenged the legitimacy of lockout itself.

Nintendo itself even, was charged as being anti-competitive due to the terms required to be a licensed developer. Again, did no developer, no publisher, not think .... "Hey, what if we didn't even have to get permission? Why don't we challenge whether or not Nintendo's lockout system itself is legitimate?"

That is to day, it's taken 35 years to get to Epic v Apple where Epic finally thinks to do just that? But, even still ... Epic is conveniently giving Sony, Microsoft, and Nintendo a pass. Even, though - they stand to gain the same benefits. Epic is really perfectly fine surrendering 30% of their revenue to each?

Maybe Judge Rodgers is missing something, but they're not buying Epic's excuse as to why video game lockout systems are acceptable if Apple's own lockout system isn't.

Believe it or not, the way it works is that, unless there is a statute that says you cannot do something, then you are allowed to do that thing until a court says otherwise. [...] Since no law is implicated by encrypting bootloaders and requiring apps to be digitally signed before executing them, what makes you think anybody is waiting for a court to tell them they are required to do it?

Sure, any business can do whatever they want. But, unless I'm missing something - I would think some developers and/or publishers would eventually have had a difference of opinion. The durability of these lockout systems to remain unchallenged for 35 years, to me, at least, suggests there is some backing for them some where. I'm trying to engliten myself ignorant dumbself.

I thought that came out of Atari v Activision.

 

[cmaier]

Correct me if wrong, but it wasn't because Tengen wanted to profit off of the copyright work that was 10NES / the CIC lockout chip. They weren't using it to "protect" their own games. That is, they were working around the CIC itself. I find it incredulous that as a defense, Tengen (or anyone else) wouldn't have challenged the legitimacy of lockout itself.

Nintendo itself even, was charged as being anti-competitive due to the terms required to be a licensed developer. Again, did no developer, no publisher, not think .... "Hey, what if we didn't even have to get permission? Why don't we challenge whether or not Nintendo's lockout system itself is legitimate?"

That is to day, it's taken 35 years to get to Epic v Apple where Epic finally thinks to do just that? But, even still ... Epic is conveniently giving Sony, Microsoft, and Nintendo a pass. Even, though - they stand to gain the same benefits. Epic is really perfectly fine surrendering 30% of their revenue to each?

Maybe Judge Rodgers is missing something, but they're not buying Epic's excuse as to why video game lockout systems are acceptable if Apple's own lockout system isn't.

Sure, any business can do whatever they want. But, unless I'm missing something - I would think some developers and/or publishers would eventually have had a difference of opinion. The durability of these lockout systems to remain unchallenged for 35 years, to me, at least, suggests there is some backing for them some where. I'm trying to engliten myself ignorant dumbself.

I thought that came out of Atari v Activision.

You have to remember that laws change over time. Now we have the DMCA, for example, that protects (with certain limitations) such systems. And it's not clear what kind of difference of opinion you are talking about. Just because something provides protections under, say, copyright principles, does not mean that it renders one immune to attack under antitrust theories.

What *is* clear is that it's perfectly legal to protect your work using technological means, unless doing so violates some other legal regime (like antitrust), and that it could very well be the case that it's fine for *me* to use such techniques but it's not okay for *apple* to do so.