Defendant Apple Inc.'S Proposed Findings of Fact and Conclusions Of
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Case 4:20-cv-05640-YGR Document 410 Filed 04/08/21 Page 1 of 325 1 THEODORE J. BOUTROUS JR., SBN 132099 MARK A. PERRY, SBN 212532 [email protected] [email protected] 2 RICHARD J. DOREN, SBN 124666 CYNTHIA E. RICHMAN (D.C. Bar No. [email protected] 492089; pro hac vice) 3 DANIEL G. SWANSON, SBN 116556 [email protected] [email protected] GIBSON, DUNN & CRUTCHER LLP 4 JAY P. SRINIVASAN, SBN 181471 1050 Connecticut Avenue, N.W. [email protected] Washington, DC 20036 5 GIBSON, DUNN & CRUTCHER LLP Telephone: 202.955.8500 333 South Grand Avenue Facsimile: 202.467.0539 6 Los Angeles, CA 90071 Telephone: 213.229.7000 ETHAN DETTMER, SBN 196046 7 Facsimile: 213.229.7520 [email protected] ELI M. LAZARUS, SBN 284082 8 VERONICA S. MOYÉ (Texas Bar No. [email protected] 24000092; pro hac vice) GIBSON, DUNN & CRUTCHER LLP 9 [email protected] 555 Mission Street GIBSON, DUNN & CRUTCHER LLP San Francisco, CA 94105 10 2100 McKinney Avenue, Suite 1100 Telephone: 415.393.8200 Dallas, TX 75201 Facsimile: 415.393.8306 11 Telephone: 214.698.3100 Facsimile: 214.571.2900 Attorneys for Defendant APPLE INC. 12 13 14 15 UNITED STATES DISTRICT COURT 16 FOR THE NORTHERN DISTRICT OF CALIFORNIA 17 OAKLAND DIVISION 18 19 EPIC GAMES, INC., Case No. 4:20-cv-05640-YGR 20 Plaintiff, Counter- DEFENDANT APPLE INC.’S PROPOSED defendant FINDINGS OF FACT AND CONCLUSIONS 21 OF LAW v. 22 APPLE INC., The Honorable Yvonne Gonzalez Rogers 23 Defendant, 24 Counterclaimant. Trial: May 3, 2021 25 26 27 28 Gibson, Dunn & Crutcher LLP DEFENDANT APPLE INC.’S PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW, 4:20-cv-05640- YGR Case 4:20-cv-05640-YGR Document 410 Filed 04/08/21 Page 2 of 325 1 Apple Inc. respectfully submits its corrected Proposed Findings of Fact and Conclusions of 2 Law. 3 4 Dated: April 8, 2021 Respectfully submitted, 5 GIBSON, DUNN & CRUTCHER LLP 6 7 By: /s/ Mark A. Perry Mark A. Perry 8 9 Attorney for Defendant Apple Inc 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Gibson, Dunn & 1 Crutcher LLP DEFENDANT APPLE INC.’S ADMINISTRATIVE MOTION TO PARTIALLY SEAL ITS PROPOSED FINDINGS OF FACT AND CONCLUSIONS OF LAW, 4:19-CV-03074-YGR Case 4:20-cv-05640-YGR Document 410 Filed 04/08/21 Page 3 of 325 Epic Games, Inc. v. Apple Inc., Case No. 4:20-cv-05640-YGR Apple Inc.’s Proposed Findings of Fact and Conclusions of Law Case 4:20-cv-05640-YGR Document 410 Filed 04/08/21 Page 4 of 325 TABLE OF CONTENTS PROPOSED FINDINGS OF FACT ............................................................................................ 1 I. INTRODUCTION ......................................................................................................... 1 II. APPLE’S VALUES: CUTTING-EDGE TECHNOLOGY, WORLD CLASS DESIGN, AND BRAND-LEVEL COMMITMENT TO PRIVACY .......... 3 III. APPLE LAUNCHES TWO REVOLUTIONARY INNOVATIONS: THE IPHONE AND THE APP STORE .............................................................................. 4 A. Apple revolutionizes mobile communication with the introduction of the iPhone. .............................................................................................................. 4 B. Apple did not originally allow third-party developers to build native apps for iOS. .......................................................................................................... 4 C. Apple decides to open the iOS ecosystem to third-party developers. ............... 5 D. Apple spends months creating an SDK for developers that permits access to Apple’s valuable intellectual property. ............................................... 7 E. Apple describes the mechanics and business terms of the App Store. ............. 8 F. In 2009, Apple launches the integrated IAP option for developers to monetize their apps. ............................................................................................ 10 IV. PRIVACY, SECURITY, DEVICE INTEGRITY, AND OVERALL CUSTOMER EXPERIENCE .................................................................................... 12 A. In opening up the iPhone to third-party applications, Apple sought to protect consumers and prioritize their experience. ......................................... 12 B. To achieve these goals, iOS architecture intentionally diverged from the macOS architecture in material ways. ........................................................ 13 C. Apple built IAP on principles of efficiency, reliability, security, and privacy. ................................................................................................................. 16 V. APPLE’S VALUABLE INTELLECTUAL PROPERTY IS AT THE HEART OF IOS APP DEVELOPMENT AND DISTRIBUTION ......................... 17 VI. IN EXCHANGE FOR USING APPLE’S INTELLECTUAL PROPERTY TO DEVELOP AND DISTRIBUTE APPS THROUGH THE APP STORE, DEVELOPERS MUST ABIDE BY THE TERMS OF APPLE’S LICENSE AGREEMENTS .......................................................................................................... 19 A. To develop apps for iOS, developers agree to abide by the terms of the Developer Agreement. ......................................................................................... 19 B. To distribute iOS apps, developers must sign the Developer Program License Agreement. ............................................................................................. 20 C. To qualify for distribution through the App Store, iOS apps must comply with the App Store Review Guidelines. ............................................... 26 D. Apple conducts a robust app review before apps are published. ................... 33 Case 4:20-cv-05640-YGR Document 410 Filed 04/08/21 Page 5 of 325 TABLE OF CONTENTS (continued) Page E. Apple continues to protect consumer privacy and security after apps are published. ....................................................................................................... 36 F. Over time, Google has been tightening its app screening process and moving to a system that is more similar to Apple’s. ........................................ 38 VII. THE APP STORE RESULTED IN SIGNIFICANT IMPROVEMENTS IN APP DISTRIBUTION, INCLUDING GAME APP DISTRIBUTION. ................. 38 A. Before the App Store, distributing video games and other software was expensive and difficult, particularly for small developers. ...................... 38 B. The App Store upended the status quo. ............................................................ 39 C. Apple has reduced its commission and the scope of transactions to which it applies. ................................................................................................... 40 VIII. CONSUMERS AND DEVELOPERS HAVE BENEFITTED FROM APPLE’S CONTINUOUS INVESTMENT AND INNOVATION ......................... 42 A. Apple has relentlessly invested in software, hardware, and integration innovations. .......................................................................................................... 42 B. Apple has relentlessly invested in new developer tools, and improvements to existing tools. .......................................................................... 45 C. Apple fiercely protects consumer privacy. ........................................................ 48 D. Apple also continually improves the App Store storefront. ............................ 49 IX. THE APP STORE’S BUSINESS MODEL HAS CONTRIBUTED TO THE RAPID PROLIFERATION OF APPS, INCLUDING GAME APPS .................... 50 A. The number of game app developers and users has dramatically increased. .............................................................................................................. 50 B. The number of game apps available on the App Store has dramatically increased. ....................................................................................... 51 C. The number of game app transactions on the App Store, and amount of revenue generated from those transactions, have dramatically increased. .............................................................................................................. 52 D. The quality of game apps available on the App Store has improved. ............ 54 X. THE APP STORE COMPETES WITH OTHER PLATFORMS FOR GAME APP TRANSACTIONS ................................................................................. 55 A. The App Store launched in a marketplace that already contained numerous rivals. .................................................................................................. 55 B. Competition for game app transactions has become more intense since the App Store’s launch. ....................................................................................... 56 ii Case 4:20-cv-05640-YGR Document 410 Filed 04/08/21 Page 6 of 325 TABLE OF CONTENTS (continued) Page XI. AFTER MANY YEARS PROFITING FROM ITS RELATIONSHIP WITH APPLE, EPIC FLAGRANTLY BREACHES ITS AGREEMENTS ......... 58 A. Epic’s Business Model. ........................................................................................ 58 B. Epic has been an Apple developer for over a decade. ...................................... 62 C. Epic has benefitted from Apple’s support over the years. .............................. 64 D. Epic has achieved success with Fortnite by using free distribution (and in-game purchasing functionality) to earn more than $700 million across over 100 million iOS accounts ................................................................ 67 E. Epic Games Store is unprofitable and not comparable to the App Store. ....................................................................................................................