Apple Fires Back at Epic with a Countersuit for Breach of Contract

Just when you thought things couldn’t heat up anymore in Epic’s battle against Apple’s alleged App Store dominance, the iPhone maker has now filed a countersuit against the Fortnite developer, seeking damages as a result of its breach of the developer agreement between the two companies.

As is usually the case with court filings in a battle like this, Apple’s lawyers are pulling no punches in stating exactly what they think of Epic’s decision to violate the terms of its App Store agreement, and although it’s unclear exactly what kind of damages Apple is seeking, it’s abundantly clear that the company wants to make a strong point about Epic’s culpability and its true motivations.

Although Epic portrays itself as a modern corporate Robin Hood, in reality it is a multi-billion dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the App Store.

Apple

First reported by CNBC, Apple notes in its filing with the District Court for the Northern District of California that “Epic’s lawsuit is nothing more than a basic disagreement over money,” and that any attempts by the Fortnite developer to paint its battle as being for any kind of greater good is disingenuous at best.

Of course, this is already painfully obvious from many of the court filings that have already preceded this; even leaving aside the hyperbolic language often used by lawyers, Epic’s strategy came out pretty much in its own words after Apple disclosed the chain of communications between Epic CEO Tim Sweeney and Apple’s executive team that actually led up to the developer’s decision to defy Apple’s App Store rules by sneaking its own in-app purchasing system into Fortnite.

While Epic claims to be fighting for the freedom of all developers, it’s only doing so indirectly at best, since its real objective from the start has been to convince — or force — Apple to allow Epic to operate its own independent app store on the iOS platform, with all of the same privileges and capabilities that Apple’s App Store provides.

However, whether Epic’s objectives are right or not isn’t the point of Apple’s latest return volley. In fact, Apple is effectively ignoring Epic’s own set of claims and focusing instead exclusively on the fact that Epic chose to breach the terms of its contract with Apple when it decided to bypass the in-app purchasing system by adding its own direct payment system.

‘Commission Theft’

In its latest court filing, Apple notes that it was basically blindsided by Epic, which it said had secretly been “enlisting a legion of lawyers, publicists, and technicians to orchestrate a sneak assault on the App Store.”

Although Epic’s CEO Tim Sweeney had already communicated to Apple’s executives that he and his company were “in a state of substantial disagreement,” after Apple had refused his request to set up his own app store, it’s clear that Apple never expected Sweeney nor Epic to actually take the final step that they ultimately did.

Shortly after 2:00 a.m. on August 13, 2020, the morning on which Epic would activate its hidden commission-theft functionality, Mr. Sweeney again emailed Apple executives, declaring that ‘Epic will no longer adhere to Apple’s payment processing restrictions.’

Apple

In its filing, Apple blatantly calls out Epic’s actions as a “hidden commission-theft functionality” within Fortnite, while also pointing out the email that Sweeney sent to Apple’s executive team that same day — an email that effectively declared outright that he was going to be in breach of contract.

While Sweeney declared in his email that Epic would be taking this action “in the firm belief that history and the law are on our side,” this is ultimately something that’s going to be up for the courts to decide. It’s been Epic’s position that it was basically forced to sign a contract with Apple because of its market dominance, and didn’t really have the freedom that it should have had to negotiate fairer terms. It was, in essence, a “take-it-or-leave-it” contract.

Of course, such arbitrary contracts aren’t inherently illegal. In fact, just about every service provider, from Apple to your cell phone and gas company offer contracts with fixed terms and no room for negotiation of those terms. Epic’s position, however, is that Apple’s behaviour is anticompetitive because of the dominance it holds over the iOS platform, and that it therefore has no alternative but to kowtow to Apple’s demands.

Apple, on the other hand, continues to insist that it’s not a monopoly by any legal definition of the term, since it has a minority share of the overall smartphone market, and that the 30 percent commission that it charges on the App Store is consistent with industry practices.

Epic’s flagrant disregard for its contractual commitments and other misconduct has caused significant harm to Apple.

Apple

In its filing, Apple also insists that all of the actions it took against Epic, from kicking Fortnite out of the App Store to terminating its developer agreement were reasonable and justifiable business decisions in response to the developer’s flagrant breach of its agreement, and with only one exception — Apple’s threat to ban the Unreal Engine alongside Epic’s Fortnite account — the courts have agreed thus far, denying any attempts by Epic to get Fortnite reinstated into the App Store on its own terms, although Epic hasn’t stopped trying to get a preliminary injunction on the matter.

The issue at hand is ultimately a very complicated one that may not even be ultimately resolved by the current lawsuits, since modern technology and the relationship between computers, applications, developers, and app stores has created a whole new legal quagmire for lawmakers and regulators to try to sort out, and despite the comparisons that many are drawing to things like retail stores and manufacturing chains, there’s really no analogy that can be directly applied here.

The bottom line is that this will likely take years to come to any kind of resolution, but at least the current fight between Apple and Epic is considerably more entertaining than the usual patent disputes, and there’s definitely a lot more at stake in the long run, even if the current fight is just two multi-billion companies duking it out over who gets a bigger piece of the pie.