OAKLAND, California – Cosmetics. Digital dances called “Emotes” A currency called V-Bucks. Virtual concerts. Fortnite, the popular gaming platform, is more than just a game. It’s a “metaverse” full of virtual life, said Tim Sweeney, executive director of Epic Games, the company that founded Fortnite.
And Apple, he argued in federal court Monday, wants the money in the Fortnite metaverse to be cut unfairly.
Mr Sweeney offered a detailed explanation from Fortnite to paint a full portrait of the world of his company on the first day of what is expected to be a three-week trial, with Epic battling Apple in a battle over Apple’s App Store fees and other rules. Reshaping the billion dollar app economy.
Epic sued Apple in August on the grounds that Apple was wrongly relying on control of the App Store to get an unfair portion of the money Epic makes selling digital goods in Fortnite.
Epic, valued at $ 29 billion and based in Cary, NC, is not seeking monetary damages. The company wants Apple apps like Fortnite to bypass Apple’s payment systems and even offer their own app store within Apple.
The outcome of the process will have far-reaching implications for the broader antitrust push against large tech companies. Apple, Amazon, Facebook and Alphabet, owned by Google, are facing various antitrust claims from federal and state governments in the US and Europe. Apple is also battling two potential class action lawsuits from consumers and developers over App Store fees.
Fortnite, said Mr Sweeney, “is a phenomenon that extends beyond gaming,” he said. “Our goal at Fortnite is to build something like a metaverse out of science fiction.”
Metaverse? A court reporter needed clarification. It’s a virtual world for socializing and entertaining, Sweeney said.
The legal arguments in the case focus on the limits of the market over which the two companies are fighting. Apple lawyers focused their opening speech on gaming, arguing that people can get access to Fortnite in many places other than the App Store, such as game consoles.
Epic argues that it is about the broader app economy and that Apple has a monopoly on iPhone users with its App Store. In particular, Epic is fighting against a commission of 30 percent that Apple pays for purchases in iPhone apps like Fortnite.
In a largely empty Oakland courtroom, Katherine Forrest of the Cravath, Swaine & Moore law firm opened Epic’s case with a preview of a series of emails between top Apple executives. The emails are evidence that the tech giant has deliberately created a “walled garden” in which consumers and developers are locked. That forces them to use Apple’s payment system, she said.
In business today
May 3, 2021, 6:40 p.m. ET
After Apple lured users and developers into its walled garden, “the garden gate was closed and the lock turned,” said Ms. Forrest. She compared Apple’s fees for in-app purchases for subscription services to a dealership that receives a commission for selling gas.
In their opening speech, Apple’s lawyers described a thriving market for app distribution, which includes game consoles, desktop computer games and the mobile web. Karen Dunn of Paul, Weiss argued that the 30 percent commission was industry standards and that Epic’s requests, if granted, would compromise the security of iPhones while Apple would be illegally forced to do business with a competitor .
Ms. Dunn added that Epic’s case is a selfish way to avoid paying fees owed to Apple and is legally shaky. “To win this case, Epic has to convince this court of so many things that don’t make sense,” she concluded.
The first day of the high-tech competition litigation included terms like hotfix, sideload, and cross-platform middleware services. However, the day started with a familiar experience in the pandemic: zoom difficulties. The start of the test version was delayed by around 40 minutes due to technical problems with the hotlines set up for remote listening.
As a further sign of the change in legal procedures due to the pandemic, everyone who was allowed into the largely empty room wore a mask or face shield. The bench was surrounded by Plexiglas partitions.
“It was an adventure – not even the year, but this case,” said Judge Yvonne Gonzales Rogers, who will decide the case.
App developers have privately grumbled over the years about Apple’s tight access to the App Store and the secret methods used to enforce its rules. But few have dared to speak publicly about it, let alone pose a legal challenge. In addition to his lawsuit, Epic has formed a charitable coalition to advocate “fairness” for app platforms like Apple and Google, Apple’s lawyers testified on Monday. Several dozen smaller companies have joined.
Mr. Sweeney has been vocal about his reluctance to control app stores over access to apps and how it affects his metaverse vision. Apple’s level of control, he said in an interview last year, is “completely unprecedented in human history.”
But Mr Sweeney was so quiet in his testimony on Monday that a court reporter had to repeatedly ask for clarification on gaming and technology terms. He was wearing a suit and took off his usual T-shirt and cargo shorts. He also wore clear face shield.
In his testimony, Mr. Sweeney explained Epic’s decision to continue the lawsuit. “I wanted to take action to show the world exactly what impact Apple’s policies are having,” he said.
In a cross-examination, Gibson, Dunn & Crutcher’s Richard Doren pounded on Mr. Sweeney with a quick series of yes-or-no questions to suggest that Epic is releasing Fortnite on other platforms such as game consoles – and that Epic is not complaining about you.
However, Mr Sweeney countered that the game consoles, which usually lose money on the hardware they sell and recoup the fees, have different business models than the Apple and Google app stores that are highly profitable.
Mr Doren asked Mr Sweeney if he knew that the actions Epic took last summer would result in Apple dumping his company’s app from the App Store. He suggested that Mr. Sweeney had hoped Apple would give in to the pressure because of Fortnite’s popularity.
“I hoped Apple would seriously rethink its policies then and there,” Sweeney said. Apple didn’t and Epic sued.
Top Apple executives, including CEO Tim Cook and executives from Microsoft and Match Group, are expected to testify in the coming weeks.