holy goddamn shit the cravath partner representing epic today is...... katherine b. forrest, the judge from the silk road case

time is a flat circle

cc: @susie_c

the hearing starts with a stern warning to all of us to neither record nor screencap this zoom call

In lieu of an illegal screencap here is a very good and very accurate sketch of this court hearing

re TRO for Epic -- "I am not inclined to grant relief with respect to the games, but I am inclined to grant relief with respect to Unreal Engine"

To Epic: "Your client created this situation. Your client does not come to this action with clean hands ..... in my view, you cannot have irreparable harm when you create the harm yourself."

Forrest speaking for Epic, points to SCOTUS cases saying that unclean hands are not a defense in an antitrust case. Judge Yvonne Gonzalez Rogers asks if these cases were briefed. They were not.

Forrest says there was no opportunity with the speed of the TRO proceeding to brief on these cases. YGR is unhappy. "You brought this affirmatively."

"They are well-known anti-trust cases," says Forrest.

YGR is unimpressed and says she "does not expect surprises" when it comes to firms like Cravath and Gibson.

Doren says he's not prepared to address these specific cases. Forrest reiterates that the SCOTUS cases are binding but moves forward.

Forrest: "We are already getting the kind of customer complaints that goes to the irreparable harm to our reputation"

YGR: All you have to do is take out the [hotfix] and return to the status quo, and then we can have our trial date in April. So far I haven't heard anything that they can't flip the switch to the way it was to August 3 and return everybody to the way they were.

Forrest: "We are getting consumer complaints every day that people are quitting." Adds that they have no control over payments made over Apple's own payment system, and that customers are asking them for refunds they cannot make.

YGR: What's happening with Google?

Forrest: We have sued Google as well.... things are slightly different in the Android environment, but we have also sued Google for anticompetitive acts.

Richard Doren for Apple: "We agree with your honor,"

ah, what a wonderful place for counsel to be

Doren: Your honor is completely right that this was a willful breach by Epic, it was strategic in nature, it was positioned so Epic could profit from its breach while this litigation proceeds, and this court should not bless a breach so that Epic can profit by its wrongdoing.

Doren: ... They should go back to the status quo, they should litigate this case on the merits, and we believe Apple's model will be proven just and competitive this coming spring.

Forrest says hotfixes are neither novel nor nefarious, despite how Apple characterizes it.

YGR: Epic Games didn't tell Apple that you had code in there that would allow you to collect directly from your consumers, right?

Forrest: We'd never hide it. There are lines and lines of —

YGR: I get to interrupt. That's my privilege

Forrest: What happened here was that we ceased to comply with an anticompetitive provision. It was with code that was resident in the build for several weeks proceeding.

"Did we understand what we were doing? Yes, we did."

Forrest says they geared up for a fight because they knew it was "the only way to break the chokehold that Apple has on its payment system and the prohibition it has on competition."

YGR notes the harms claimed to consumers and then asks, "Where is the harm to Epic?"

Forrest: We are not seeking monetary damages... we do not believe monetary damages make us whole.

Forrest says that the customer complaints / reputational harms are cognizable, irreparable harm (prereq for a TRO)

Forrest: We don't have to have a complete decimation of our business so that —

YGR: *interrupts* It's not a decimation.

Then gives floor to Apple lol

YGR says that if Apple is right in this case, "Epic just owes you money ... You don't have to take the step of removing access."

Doren says that Epic sought "to break that model, to profit by it, and to have customers caught in the crossfire." Says that this was all an anti-Apple campaign referencing the 1984 ad etc.

YGR interrupts with, "Yes. I know."

YGR: "With respect to Unreal Engine, that seems like an overreach." Says that the contract with Epic International is not in breach, even if the contract with Epic Games is. Says that it looks retaliatory to her.

Doren: Epic Games International S.a.r.l. is Epic Games, it's Unreal Engine...

YGR: I thought I read that they were two separate companies. Are they —

Doren: There is an Epic SARL entity, and it has an account with Apple, as does Epic Games.

(SARL entity = an international corporate entity; so this is a separate corporation but Apple thinks this is a shell corp and wants these two corporations treated as the same).

YGR: I don't know if this is a shell corporation. I don't know if there is going to be piercing of the corporate veil. But I know there are two separate contracts. ... and two separate fees

To paraphrase, Apple's case re: Unreal Engine is that Epic is sockpuppeting, Epic's case is that Unreal Engine is from a completely different dev account and this is retaliation for Epic did with Fortnite.

Doren says that Epic's conduct "would spread like a virus" if Apple is forced to maintain Unreal Engine.

Veronica Lewis of Gibson Dunn attempts to chime in, and gets very firmly admonished by YGR for "tag teaming."

Forrest: We're not saying SARL is not affiliated with Epic Games. What we're saying is they've reached out beyond the contracts and the accounts..... where the in-app purchasing conflict occurred. ... These are independent contracts. This is purely a pressure tactic.

Forrest on what happens without a TRO: "The Unreal Engine will be destroyed... app developers need the ability for their app to be deployed on multiple platforms."

Forrest: "If Epic cannot offer that with the Unreal Engine, the Unreal Engine will cease to exist. ... Developers are fleeing the Unreal Engine now."

Forrest was talking public interest factors about Unreal Engine and then managed to get YGR to let her slide in sideways and talk about the public interest with respect to Fortnite. "Their social groups are going to be unable to communicate with each other," she says.

Brings the pandemic into it. "These kinds of social interactions become incredibly important."

Doren: Let me take it back to first principles. All Epic needs to do is to put a compliant version of Fortnite back on the App Store.

Says that's all they need to do so that consumers can, and I quote quite literally, "ride their sharks and buy their dances on Fortnite."

YGR: You must concede that the revocation of the engine will negatively impact third parties.

Doren: It's self-inflicted — not self-inflicted, I mean it's manufactured by —

YGR: *mutes him on Zoom* I get to mute you. I get to interrupt you. I asked you a simple question: yes or no?

Doren now has to unmute himself to respond. YGR keeps pressing him to answer yes or no. Doren keeps talking around it like, "That's why Epic should cure its breach, yes."

Expensive lawyering is a beautiful thing to witness

YGR: First of all, we're talking about a company worth billions, versus a company worth trillions. What I don't know, when you talk about devastation of a company, how much does the game aspect account for profits or market value, versus all of these other things Epic Games has?

YGR reiterates that she's inclined to grant a TRO with respect to Unreal Engines, but not for Fortnite. Forrest says it's all part of the same "integrated" retaliatory package.

(This strikes me as unconvincing).

Forrest says there is no security issue with what Epic wants to do. "What we know is that Apple would not be paid what it wants to be paid."

Doren: I think it's important to state the obvious, which is that the nature of the breach here is to assure that Epic be paid. It's not so Apple could be paid, it's so Epic could be paid without commission to Apple.

Doren: Most of Epic's business has nothing to do with iOS. The iOS platform is about 12% of their revenue.. most of their platforms are elsewhere... Epic only went mobile in 2018 and they did so on Android and iOS.

Doren describes the hotfix as: "slip something in through the backdoor and trigger it two weeks later in the dark of night"

Doren quotes a Sweeney email about Epic being in conflict with Apple "on many fronts" for many years.

YGR says "OK, yes, I've read that email. And other emails."

YGR: There appears to be an interesting battle here. There appears to be some measure of lack of competition. And high barriers to market entry.

YGR: There also appears to be evidence that everyone who is using these platforms to sell these kinds of games is charging 30%. Whether or not Epic likes it, the industry, and not just Apple, seems to be charging that.

YGR: Epic itself charges third parties...

Doren: 12%, your honor.

YGR: 12%.

YGR: The battle won't be won or lost on a TRO and it won't be won or lost on a preliminary injunction. Apple has a reputation of going the distance.... they acted the way they did here, but I think it was an overreach.

YGR: I don't think a weekend of briefing on a TRO really does justice to the antitrust issues that are at issue in this case.

Says therefore the merits don't play as much of a role in the TRO decision.

jfdklafds Gary Bornstein for Epic starts off by apologizing for any noise coming from his connection that might have been construed as an interruption. He's been muted like this entire time, he's JUST shading his opposite number for interrupting earlier

Bornstein says that if Apple's App Store is so high quality and so secure, then they should compete.

"They've given them no choice of store, they've given them no choice of processor."

Bornstein makes a shoutout to Judge Alsup specifically in Psystar v. Apple

Epic is really eager to get into the facts of whether or not Apple is a monopolist, and Apple is not, aside from general terms about how Apple is totally competitive if you get into the details (which they cannot get into, at this moment, right now)

The hearing started out with YGR asking when each side was going to be ready to go to trial — Epic said 4-6 mos, Apple said approx 10 mos. Apple is leaning on this to avoid talking about their monopoly.

YGR: If you have an iPhone you can't buy it [an app] from anyone else. You can't buy it from Google. You can't buy it from Amazon. So without competition, where is that 30% coming from? Why isn't it 10% or 15%? How is the consumer benefiting at all?

YGR: There are plenty of economic theories about the cost of people to switch, whether the platform is Android or iOS.

Doren insists that people "switch all the time" and they'll be able to prove it at a later stage. Again, hand-waving in order to avoid talking about monopoly

Bornstein says that they're reaching into "subsequent transactions" — like Expedia taking a cut of your room service order at the hotel you booked through them.

They're all using Best Buy as an example and YGR laughs and says it's not the best example anymore because even though Best Buy has a storefront, Apple owns its section and pays Best Buy, "for labor, I guess?" Says, "people should really investigate how Best Buy actually works."

YGR says she will issue the order quickly, then asks for wrap-up comments.

Forrest's last comments are to (1) embrace Epic's role as a "private attorney-general," (2) once again reiterate that the hotfix is not "secret code," (3) apologize for not briefing the unclean hands antitrust cases prior to the hearing

YGR passes on having the antirust cases briefed now, and says she can address it in the next round (I believe the "next round" refers to the preliminary injunction).

Doren: Mr. Sweeney intended to fight Apple for years, to get his way. This is not a fight that Apple picked.

Did YGR just pull out a planner

Forrest asks that the deadline be Sept 8, instead of Sept 7, since it's Labor Day. YGR, "As you're aware, ECF is open 24 hours a day" but lets them off anyways

Yeah this is the best snap filter that I am not allowed to take a screencap of https://twitter.com/eriqgardner/status/1298037587123331072

Preliminary injunction hearing will be Sept 28. Written order on TRO is coming "shortly." Hearing is adjourned.

My immediate reaction is that it's pretty obvious that the TRO re: Fortnite will not be granted, but it's likely there will be a TRO re: Unreal Engine (unblocking that dev account, presumably).

The absolute funniest part of all of this is that even with the extremely stern warning about not recording or screencapping, the entire hearing was livestreamed on YouTube (no link because I have zero interest in getting in trouble with the honorable judge)

This is normal for courts, so it's just extending normal court rules out to Zoom, which frankly doesn't make much sense but eh a lot of things don't make sense in 2020 https://twitter.com/notkavi/status/1298040680011317248

Apparently people who wanted to listen couldn't, because the zoom webinar was capped at 500 seats! Seems like there's good reason to allow broadcast of the audio of the proceedings at least. (Courts hate video and I can't really fault them for it).

Ruling came down tonight! As expected, the TRO is granted with respect to “any affiliate of Epic Games” (in other words, Unreal Engine) but not granted with respect to Fortnite.