In Apple and Epic’s First Hearing, Apple Wins the Right to Boot Fortnite, But Not Unreal Engine

Photo: Chris Delmas/AFP, Getty Images
Photo: Chris Delmas/AFP, Getty Images

Last week, Epic filed for a temporary restraining order (TRO) to prevent Apple from terminating all of Epic’s developer accounts and cutting the company off from iOS and Mac development tools, which would go into affect on Friday August 28, 2020. The U.S. District Court for the Northern District of California heard arguments from both sides yesterday, and eventually ruled that while Fortnite would not be returned to the App Store, Unreal Engine was safe.

As Bloomberg notes, in her ruling Judge Yvonne Gonzalez Rogers wrote “Epic Games and Apple are at liberty to litigate against each other, but their dispute should not create havoc to bystanders.” The ruling follows what the judge said at the top of the hearing about being “inclined” to deny Epic’s TRO request to put Fortnite back on the App Store with direct purchases enabled, but prevented Apple from removing Unreal Engine — a move that Epic said would cause irreparable harm not just to itself, but to all other developers who rely on Unreal Engine and the cross-platform development tools it offers to create games.

The hearing itself was entertaining theatre, with both sides arguing passionately, and tempers periodically inflaming. At one point Judge Rogers muted Apple counsel to chastise him for a meandering argument that ignored her initial question. While there was plenty of legalese, everyone involved was clearly aware of just how public the hearing was and how many were tuning in via Zoom to watch. Judge Rogers even took a moment at the beginning of the hearing to address those watching via Zoom, and explain the nature of the Temporary Restraining Orders Epic had requested.

Apple Has Finally Gotten Too Big for Its Britches

What started out as a battle between Apple and Epic over direct in-app purchases in Fortnite has evolved into an ill-advised, petty revenge scheme. On Sunday, Epic filed a new motion to bar Apple from revoking iOS and macOS support for its Unreal Engine while its other beef is ongoing.

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Quickly Apple argued that it was in the company’s best interest to not only remove Fortnite from its App Store, but given Unreal Engine and Fortnite are, in essence, made and controlled by the same company, that leaves the door open for Epic to do the same thing with Unreal Engine. However, after Judge Rogers muted Apple and demanded a yes or no answer Apple conceded that by removing Unreal Engine from the App Store, 3rd-parties, like developers, would be affected. In arguments before the judge Apple sounded almost vindictive saying all Epic needed to do to avoid catastrophe was to “put a compliment version of Fortnite” on the App Store and everything would go away. Perhaps not the best way to phrase its arguments if it wanted to avoid looking like a monopoly with undue power.

Epic Games countered that Fortnite and Unreal Engine both have separate contracts with Apple to be on the App Store, and while Epic Games did willingly breach its Fortnite contract with Apple, it did not breach its Unreal Engine contract with Apple.

In the hearing District Judge Rogers said Apple reached beyond its Fortnite contract with Epic Games, and that slamming Epic with an additional penalty, especially when it would cause no harm to Apple, looks retaliatory.

It’s a small victory for Epic, but it’s just one of many battles. Neither company has won the war. Today was the just first of what will likely be many future hearings in the on-going Epic verses Apple saga. “This is not something that is a slam dunk for Apple or Epic Games,” Judge Rogers said during the hearing.

The case around Fortnite remaining on the App Store is far more murky. Apple dropped a bombshell of a claim that Epic purposefully hid a code in its Fortnite app so it could “trigger” direct payments after it was approved for the App Store. Epic vehemently denied this claim.

The Judge also asked Epic why it couldn’t simply return to the “status quo,” or remove the direct payment method, which is a violation of Apple’s App Store guidelines. Epic argued that having all payments go through the App Store hurts its relationships with its customers because Epic does not have control over refunds — despite repeating several times throughout the hearing that Epic is not seeking monetary damages.

In contrast, the Judge said to Apple that it did not have to remove Fortnite from the App Store. Apple retorted that it did because Epic breached its contract, but it was being generous to Epic by giving it 14 days to fix its app because it values Epic’s customers. Epic’s customers are Apple’s customers, the company’s attorney said.

(For comparison, it’s worth noting that Apple recently blocked WordPress from updating its app on iOS because it did not include an option for in-app purchases — something that it quickly reversed.)

Epic fired back by claiming Apple forces all developers to put their apps on the App Store and then insist developers pay Apple for their “services”. Epic said Apple was being “monopolistic” with this practice.

In the course of the hearing Judge Rogers raised a good point, a point that Epic has long touted itself: why does Apple need to charge a 30% commission rate? Why not 10% or 15%? How is the consumer benefiting? This is something Epic Games attempted to illustrate by charging customers $US2 ($3) less for direct purchases via its iOS app than through the App Store itself.

Apple said consumers are free to choose if they use its products or not, and they can easily switch to another platform but it iOS to Android or macOS to Windows. While true in practice, apps that are built for either Android/Windows or iOS/macOS are coded differently because the operating systems work differently. Maybe someone could easily play Fortnite on another platform like PC or console — Apple pointed out during the hearing that iOS in-app purchases only account for 12% of Epic’s total Fortnite revenue, a claim that Epic did not refute. But not all games can work cross-platform like Fortnite can simply because the game is tied to a user’s account. Which is why throughout the hearing Epic’s lawyer made it clear this was a fight not just to preserve its own bottom line, but to lay siege to Apple’s perceived monopoly.

For now, it has a minor victory, and while Fortnite won’t be returning to the App Store any time soon, the hundreds of games relying on Unreal Engine and currently in the iOS and macOS app stores should be safe.

The next hearing is set for September 29, 2020.