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Judge Grants In Part Temporary Restraining Order In Epic Games v. Apple

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Judge Yvonne Gonzalez Rogers of the Northern District of California issued an order on Monday in Epic Games’ suit against Apple; the judge granted in part Epic’s motion for a temporary restraining order finding that Apple should not have banned Epic Games’ affiliates and their developer tools after Epic Games breached its agreement with Apple.

Video game publisher Epic Games brought the suit against Apple claiming that Apple violated the Sherman Act, California’s Cartwright Act, and California’s Unfair Competition Law in relation to Apple’s App Store policies. Epic Games contended that Apple’s in-app purchase (IAP) system, “through which Apple takes 30% and further prevents its game, Fortnite from offering its own IAP outside of Apple’s system.” Epic Games filed a motion for a temporary restraining order asking for relief for its products.

Epic Games’ Unreal Engine is hosted by a related company, Epic Games International; the Unreal Engine is “used by third-party developers for the development of video games for both console and mobile platforms, including for games currently offered in the iPhone App Store.” Furthermore, “Apple’s agreements with (third-party) developers and the App Store guidelines do not generally permit third-party developers to circumvent the IAP system.” Apple has separate agreements, developer licensing agreements, and software development kits between Epic Games and its related companies. In mid-August, Epic Games decided to breach its “allegedly illegal agreements with Apple by activating allegedly hidden code in Fortnite allowing Epic Games to collect IAPs directly.” As a result, Apple removed Fortnite from the App Store, and as of this order it is still unavailable. Afterward, Apple notified Epic Games that because it breached the App Store guidelines and their agreements, “it would be revoking all developer tools, which would preclude updates for other programs, including Unreal Engine.”   

Examining the likelihood of success on the merits, the court determined that Epic has not met its burden, especially for an antitrust action. However, the court did add that “serious questions do exist.”  The court also deemed that Epic Games did not demonstrate irreparable harm, noting that the “current predicament appears of its own making,” not “from the express terms of the contract,” as required. However, the court found that Epic Games “made a preliminary showing of irreparable harm as to Apple’s actions related to the revocation of the developer tools (SDKs),” stating that the separate agreements with Epic Games’ related entities were not breached. The court stated that Apple’s practice of removing affiliated developer accounts would “be better evaluated with full briefing.” This could purportedly damage the related entities not directly at fault. Considering the balance of equities, the court found that the equities weigh against Apple by pointing to the fact that Apple does not claim that it will be harmed by any restrain on removing developer tools and that “Apple has chosen to act severely, and by doing so, has impacted non-parties, and a third-party developer ecosystem.” The court said in regards to Epic Games, the public interest is in “holding private parties to their agreements.” However, for Unreal Engine and the developer tools, third-parties and the overall gaming industry are affected. Thus “Epic Games and Apple are at a liberty to litigate against each other, but their dispute should not create havoc to bystanders.” As a result, the court stated that the status quo should be maintained. The court concluded that the factors weigh against granting a temporary restraining order for Fortnite and other games but in favor of granting a temporary restraining order for Unreal Engine and other impacted developer tools.

Consequently, Apple is temporarily restrained from “taking adverse action against Epic Games with respect to restricting, suspending or terminating any affiliate of Epic Games… from Apple’s Developer Program,” including Unreal Engine, based on Epic Games’ own IAP system in Fortnite. This will remain in effect until the court issues an order on the motion for preliminary injunction. The motion for preliminary injunction is due by September 4.

Epic Games also recently sued Google in addition to Apple.

Epic Games is represented by Faegre Drinker Biddle & Reath LLP and Cravath, Swaine & Moore LLP. Apple is represented by Gibson, Dunn & Crutcher LLP.

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