Aron Solomon: Epic vs. Apple, The Legal Battle Royale

Here we are in May, and Epic v. Apple, the court battle between Epic and Apple has begun in the United Staes District Court for the Northern District of California. The factual background that you need to know to understand this case is less complicated than you would imagine.

Epic has a massively popular game called Fortnite that has earned more than $10 billion. After Apple removed Fortnite in 2020 from its iOS App Store (Android did the same, parenthetically), Epic decided to sue Apple.

Apple took this action because Epic had essentially tried to cut Apple (Epic did the same to Google) out of the Fortnite transactions, which Apple will surely argue in court was a violation of their contractual agreement.

Specifically, Epic began to sell their Fortnite currency, known as V-Bucks, directly to players, cutting Apple out of the financial loop. Epic were incentivizing players to purchase this currency directly from them, with the motivation for players to do so being a 20 percent discount over the cost of that currency through the iOS or Android platforms.

In removing Fortnite from the App Store, Apple argued that Epic had taken the steps of violating Apple Store guidelines that are applied to every developer and intended to keep iOS users safe.

In some ways, this case is reminiscent of cases over the past 50 years involving sports stars that we love. Because Fortnite is something that has captured the popular imagination, it’s very easy for people to take sides in this legal battle based on its popularity and our attachment to it. That’s where the sports parallel works well here. Endless sports radio and social media pundits opine every day as to whether a team or a player is in the right about a contract to be offered or withheld.

Both Apple and Fortnite are popular and have lots of fans

It’s natural that we pick sides based on our affiliations. But those are opinion-based discussions between fans and pundits, neither of whom have the contract in front of them or the training to be able to break it down and apply the law.

So even though Fortnite is an extremely popular game and Epic has a massive amount of public opinion on its side — even aside from the fact that few people have historically liked Apple as a company aside from the fact that we love their products — it’s far too simplistic to make this a one-sided vote of support even for the most ardent Fortnite fans.

From a legal perspective, what Epic is doing, at least on its face, appears to be a violation of the terms of service they agreed to in entering the iOS vendor platform and sales channel.

Jeffrey Zenna, a lawyer with the New Jersey firm Blume Forte Fried Zerres & Molinari, argues that we are looking at fundamental fairness here: “If it turns out that Epic was essentially taking business away from Apple on Apple’s proprietary store, and if this was a breach of the agreement that Epic signed with Apple, then Apple may have been justified in removing Fortnite from the iOS store. While there are many high-profile cases that inflame public opinion, in contract disputes, we always need to look at the law and the contract itself.”

Beyond the law is the issue of fairness

And aside from the law, from a pure fairness perspective, here is the argument to be made against Epic. Somebody says “You can come into my yard and sell your lemonade. All you need to do is give me a cut of every glass of lemonade you sell.” You agree to this and for a while you abide by the letter and spirit of that agreement.

A while later, you decide that since your lemonade is so popular, people who visit the yard will now have an option of buying that lemonade in person or buying it elsewhere at a discount. Of course, that discount will mean that you will still get all of your lemonade sales money, yet the person gets nothing whose lawn you have not only sold the lemonade on but who was instrumental in creating your sales channel. It’s not a great look.

One of the arguments frequently made in the court of social media in favor of Epic is some abstract notion of a free market. It’s interesting that the vast majority of people who quote the free market actually aren’t talking about anything that’s market-related, just a random idea as to how a theoretical free market should operate.

Their argument is that if you manufacture a wildly popular game, you should be able to sell it wherever you want at whatever price you want. That is not a point of legal dispute in this case. It would also not be a point of legal dispute for you to sell your lemonade on someone else’s lawn, your own lawn, or, assuming it was legal, on the side of the highway.

But one of the things that will surely come to light in this case is the massive investment Apple has made over many years to build their iOS platform and the accompanying App Store, which nobody argues is not proprietary. The App Store is the App Store, it belongs to Apple, and it is where each of us who have an Apple product go to get apps.

Another pandemic-related analogy: Food delivery apps and free advertising

Which leads us to another good pandemic-related analogy — the rampant use of food delivery apps. Imagine if a restaurant would try to set up their presence on something like Uber Eats but when you go to the restaurant’s page on Uber Eats all it says is, “Do not order here! Contact the restaurant directly for a 25 percent discount on the price UberEats will charge.”

Nothing here would be factually incorrect, nor would the restaurant be precluded in any way for setting their own price for food that you could obtain directly from the restaurant. The problem, of course, is free-riding on the back of all of the work that UberEats has done to build a massive user base and a seamless platform for you to be essentially telling people, “I will take this free advertising, but don’t shop here!”

And that is what many predict will be the legal foundation for the Court’s analysis in Epic v. Apple, a case that will not stray far from the public imagination, especially for the hundreds of millions of ardent Fortnite fans who will relish this new battle royale.

Finally, one of the interesting things here is that it was absolutely no surprise to Epic the way that Apple was going to react to what the District Court could deem to be a clear violation of the App Store’s rules. It is worth noting, as it absolutely will be in court, that Epic had a big money PR campaign just waiting for the moment they were banned from the App Store.

One has to give Epic some credit for truly going all in here. Not only did they allegedly try to cut Apple out of revenue generated from Apple’s own revenue stream, they leveraged the fame of Apple’s own tens of millions of dollars of investment into their famous PR campaigns with this video.

No matter the end result of this case, Fortnite is a wildly popular and famous game, and Apple has made an absolute ton of money in the past year. If there was ever a legal battle of titans where both sides would not only survive but could be seen as victorious regardless of the results, Epic v. Apple might be it.

Aron Solomon is the head of digital strategy for NextLevel.com and an adjunct professor of business management at the Desautels Faculty of Management at McGill University. Since earning his law degree, Solomon has spent the last two decades advising law firms and attorneys. He founded LegalX, the world’s first legal technology accelerator and was elected to Fastcase 50, recognizing the world’s leading legal innovators. This piece is exclusive to Broadband Breakfast.

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