Epic v Apple Daily Pool Report Day #12


Bobby Allyn
 

Here are all our feeds from the day, written by both me and Josh.

 

We are done for the day, until 8AMPST tomorrow. Phil Schiller is off the witness stand. Now on is Apple’s Michael Schmid, who is being questioned on direct by Apple’s Jay Srinivasan, resuming tomorrow morning.

 

Final feed of the day, from Josh and me:

 

Redirect of Schiller started at 1:45PST by Apple attorney Richard Doren

 

Schiller was asked about Apple’s enterprise program, which allows companies to download company-specific apps on the iPhone and bypass the app store. Schiller says Apple works with large companies, vets them and gives them a special security key to allow them to download to devices. They have to sign an agreement they will only download to employees and not "consumers in the wild."

 

RD: Are there abuses of the enterprise program?

PS: Apple has found places where employees of a company have, unbeknownst to the employer, will pirate software. And there have been actual malware attacks created by stores that used an enterprise key to get their software onto the users device. It’s a great concern,  and we have been tightening the security around the enterprise program

 

RD: you shown a lot of news articles about various investigations. Has the Coalition for App Fairness played any role in testifying in those investigations, have they testified before congress?

PS: spotify, tile, match

RD: have any of the members advocated at the EU?

PS: spotify and match, as well as epic

RD: is shown a document about a russian investigation, and a law that was passed in russia

PS: The Russian government required earlier this year that smartphone makers preinstall a list of Russian apps defined by the gov to encourage russain users to download russian apps; It had nothing to do with app review, and didn't allow for stores within the app store

 

 

On App Store Profit

 

Apple lawyer Richard Doren, responding to the line of questioning on cross in which Phil Schiller indicated that he had no idea whether the App Store was turning a profit:

RD: Do you question whether the App Store has added to the bottom line of Apple?

PS: No I do not.

 

On Porn-y apps

 

RD moved the fetish/data/quasi-porn-sounding apps that Epic pointed out during cross-examination.

Epic was demonstrating that there appeared to be apps in the App Store that violated the company’s terms and that Apple’s reviewers have missed, yet Apple says there is a large gray area in the world of dating/fetish apps.

“This is certainly and always a difficult area for us,” Schiller said. “There are categories of things we don’t want on our store, like pornography.”

Developers. Schiller said, sometimes try to see “where’s the line” with dating/nudity apps.

RD says: “Sir, during lunch I became the proud owner of Sex Position 3D,” asking if models in the app are clothed. “I assume,” Schiller replied.

 

On Tracking

 

On direct, Schiller pushes back on Epic suggestion that Apple is intrusively tracking users.

To Schiller, when a developer needs information from a user to deliver a service, that is not tracking. “That’s delivering a service,” he said. “Tracking comes in when data is shared with third parties and data-brokers.”

If one goes to vacation France, for instance, country-level location data could be used to make local recommendations, like an app for the Louvre, or a translation app, but that information is now provided to third parties, he says.

Schiller says Apple does not sell data or share user data with data brokers.

 

On remedy

 

RD: you were asked questions about the remedy, Epic is seeking have you read the language in Epic's lawsuit about what it wants?

PS: no

RD: KF said Epic doesn't intend to end the whole app review process, but it does want Apple to allow stores within stores. Would that eliminate app review for the apps in stores within stores?

PS: yes, and we try to make rules that apply to all developers, so if there's a rule that allows stores in stores then it's unbounded. "I don't know how this scales… how it can be reviewed and managed.”

RD: re IAP KF suggested third parties should be able to use their own payment system. As a businessman do you object?

PS: I have a number of objections. Users really value the ability to manage the subscriptions, and there's a number of features that all work because they connect to that payment system; Apple would also lose the ability to understand the various "fraud vectors" that put the App Store at risk

 

On commerce in App Store pre-IAP

 

KF points to emails with Apple about commerce happening in apps downloaded from the App Store prior to November 2009, when IAP Services launched.

Schiller balks at this suggestion, saying that is not true.

KF: “It’s your testimony that there were no in-app commerce opportunities that developers availed themselves of prior to November 2009?”

Schiller: For digital goods consumed on the iPhone, yes.

 

On podcasts:

 

YGR: asked were by KF about Apple’s new program for podcasts, and said it didnt relate to the app store, can you explain?

PS: we were talking about the different ways apple makes money from the store, and the podcast service is a separate service

YGR: how do they subscribe?

PS: through your same apple account you pay for your podcasts and apps

YGR: how does that work logistically?

PS: you can use your apple id in the app store, as well as for music, podcasts etc

YGR: podcast subscriptions still have to go through your payment structure

PS: yes

 

Phil Schiller is now off the stand.

 

Taking the witness stand now is Apple’s Michael Schmid, who heads games business development, questioned by Apple’s Jay Srinvisan.

 

So far with Schmid:

 

Goes through background, describes himself as the "developer advocate" at Apple.
Started at Apple in 2017, prior to that was in mobile games in customer service, before moving to mobile analytics and marketing.

Schmid said he worked with Apple a lot in his earlier jobs. In his current job, he gathers feedback from game developers about Apple

Says developers get to choose their own category in the App Store, and Epic chose “Games”.
Games are treated differently in the store, there’s a separate tab in the store and business development team at Apple

Schmid says there are many game apps and non game apps that are available on various platforms, android, desktop, ios. Says its very common for games to be developed across platforms, ie Heartstone, Minecraft, Roblox are all examples

Schmid says many games are also cross wallet, where the currency purchased in a game will transfer across platforms, ie Fortnite, Roblox; These games have become more prevalent bc they allow developers to “control their entire economy”

 

XXX

 

KF questioning of Schiller continued. She calls up email with an Epic official, who wrote about a leak from Apple that concerned Epic: “We have suffered a major blow to the unveiling of our next season. There were concerns about a leak coming from Apple in the lead up to the season, and those fears ended up being substantiated. The media damage alone is significant.”

 

Moved beyond this issue without really concluding it and then revisited from earlier the apps including TikTok, Snap, Reddit, where BDSM and other sex-related apps are available in the Apple App Store. KF’s point here is that such content is arguably prohibited under Apple App Store rules (contained in a large binder to be entered as evidence).

 

When App Store launched, in 2008, Apple only had a mechanism to get paid for apps, not in-app purchases, KP noted, suggesting that Apple execs spied opportunity here.

 

For example: Forrest calls up a 2008 email from Apple exec Scott Forstall. He wrote that there was a “healthy after-market” for “game levels, enhanced graphics, in-game activities.” Many for a fee. “Some developers will want this for their iPhone app”

 

Re IAP 

 

KF: says In 2008 not using IAP would be grounds for rejection, but the guidelines werent published until 2010

KF: “secret guidelines”?

PS: no, we would have told the developers why they were rejected

 

Dec. 2014 developer complaint: guidelines are vague, should be just focused on security, says they won't develop for apple watch

 

Re: self-preferencing:

KF: yesterday you said apple doesn't allow search ads for apple products, (in response to a YGR question,) but the algorithm actually preferences apple products

PS: don't agree

KF: shows an app store still image, a search for "books", first return is for Audible, Apple Books is the first organic entry, same for music, pandora is the paid result, but apple music is the top search result; same with news; Apple has changed the algorithm that relates to search and preferences its own apps?

PS: no

KF: It happens by chance?

PS: no it looks at 42 variable to give the user the best result, doesn't know how the 42 variables are each weighted

 

XXX

 

And we’re back. YGR is back on the bench. Cross of Apple exec Phil Schiller resumes.

 

 

Sorry: Lunch break started at 12:35PST. We resume at 1:15PST

 

XXX

 

We’ve wrapped for lunch at 1:35 . Cross-exam of Schiller will continue after lunch, at 1:15PST.

 

Josh wrote some sections, and I wrote some sections.

 

After the morning break Forrest starts by asking about whether Apple's small business program - which dropped the 30% commission to 15% for developers with under $1 million in revenue -  was to help Apple out with its competition problems and Schiller says those issues and the developer interests “aren't mutually exclusive."

 

Forest says the pandemic isn't mentioned as a reason for the program in any of the documents about the program 

Schiller says he believes he had communications that it was one of the reasons.

 

Schiller says: “It was pushed by me, specifically,” saying there was growing App Store scrutiny, but many things led to the Small Business Program.

 

Questions about App Store profits:

 

KF: says the App Store has been profitable since 2009, but PS says he does not know that.

 

KF: “How is it that the executive responsible for a major business in the country, you don’t even know if it is profitable? How can that possibly be?”

 

PS: “Because that’s now how I look at the business and not what I measure the team on.”

 

KF, raising voice: “Doesn’t anybody ever wonder, ‘Hey is the app store profitable?’ Doesn’t that ever come up?”

 

PS: “No, it doesn’t come up”

 

Forrest cites a 2017 Apple press release about paying more than 70b to developers since the store was created which would give Apple about 20b, and Schiller agrees

 

Schiller says Apple hasn't calculated app store profits. Doesn't deny that it probably is, but says they don't specifically calculate it.

 

Series of questions about antitrust allegations and investigations of Apple:

 

Schiller acknowledges that Spotify filed an antitrust complaint in EU in march 2019; shown emails about the House Judiciary committee’s tech antitrust investigation, a 2019 Russian antitrust probe of the app distribution market, and the EU investigation opened last summer, and negative press generated by Basecamp executives complaining publicly about Apple’s App Store policies

 

Schiller was shown emails from June 2020 and asked questions around Apple looking to put together a list of developers “that will put out public statements in support of Apple.” That was supposed include developers with apps in both the app store and arcade (Apple's game store)

 

KF: this was to counter the bad press and regulatory investigations?

PS: ”I wouldn’t say that,” says there was a developer that reached out to Apple to offer support and so “we were looking for others”

PS: “Don’t think this is related to basecamp at all” 

KF: related to competition issues?

PS: “Certain people were complaining about it and we wanted to show” that others were really happy with it.

 

KF: Asks about reports that DOJ and states were investigating Apple and the App Store for antitrust violations

PS: doesnt admit to the probes, and says he doesn’t remember the press reports; “we get a briefing email every single day i dont remember which one was in [what] and when.”

 

July 29 email from Apple PR official Fred Sainz about the upcoming House antitrust hearing with Google, Apple, Facebook and Amazon exec that was sent to Tim cook, schiller, katie adams (general counsel), kyle andeer (antitrust head), lisa jackson (Policy head), and other lawyers. The email references a nyt editorial about what questions lawmakers should ask the four execs 

Schiller says he’s “sure” he read stuff about the house hearing but doesnt remember what exactly

 

Shown articles about App Store investigations in South Korea and Japan; 

 

KF: Do you recall receiving a powerpoint that japan represented one of the biggest threats to the app?

PS: no

 

Asked about Australia’s app store investigation and he remembers that one

 

Back to the small business program

 

KF: Apple’s intent was to find a way to have the least possible financial impact on apple

PS: i dont agree with that characterization

 

Back to the House antitrust investigation and the announcement that it was completed in oct 2020

PS: says he doesnt recall the announcement, and doesnt recall the investigation into competition in digital markets

 

Px 1911 Doesnt remember seeing a story about the UK antitrust investigation announced earlier this year, or recalls ever learning about a CMA investigation of the app store

KF: no one ever told you?

PS: they may have, they may not have

 

Schiller does remember the Senate antitrust app store hearing from last month

He’s also aware of a fine the Russian antitrust agency imposed last month

 

Was the small biz program bc of a "cascade" of bad PR, regulatory and judicial activities?

PS: that's part of it, but the pandemic was also a major part of it.

 

The conversation then moves to privacy.

 

KF walks Schiller through all that the App Store collects and retains on users: browsing history, searches, purchases, downloads, user’s IP address, iPhone model, amount of storage on iPhone, etc., all spelled out on Apple’s website (KF makes it a point to show the court how it takes some clicking through to find the data collection disclosures.)

 

KF: “Apple can basically follow you to locations? It can find you. It knows where you care?”

 

PS: “It’s not about tracking where you are. It’s about giving you geographically relevant applications.”

 

On opting out of data collection for ad targeting, KF asks: “You have a way to prevent from getting ads but there’s no way to prevent it from being collected?”

 

KF: It’s a lot of information, wouldn’t you agree?”

 

PS: No, I wouldn’t.”

 

XXX

 

Greetings from Oakland. I'm Josh Sisco with The Information. Bobby and I decided to tag team the pool reports 

Questions/comments/concerns at josh@... or 707-695-4512.

 

Back from the morning break at 10:38. Will be better about time stamps going forward.

 

Schiller cross exam continued by Katherine Forrest, the notes pick up after the questions about the Goldman Sachs report. 

 

KF asks Schiller a series of questions about transferring movies from iOS to Android. 

Schiller says most people actually are streaming movies so owning a large library of movies isn't a barrier to switching 

KF: How easy is it to transfer movies from ios to android, can they be moved?

PS: “I dont know if they can or cant”

Forrest shows him some comments from Apple exec Eddy Cue that says if you own a movie in iTunes, it can't be transferred to Android, and Schiller agrees.

KF then shows a long list of movies starting with My Cousin Vinny, which YGR says is "great" 
KF: It wouldnt take much to exceed $100 in a film libary?

PS: if thats what you choose, 
Re icloud

KF: if im an android user can i get icloud?

PS: i dont believe so

Q: if im an android user in an iphone family i cant participate in a shared icloud account?

A: correct


From june 2013 email, Schiller: says itunes and icloud factor heavily in the difficulty to switch to android

KF: do they still?

A: not as much 

 

There was some aggressive questioning from KF about whether schiller wanted to learn “how to explain” the emails that he didn' remember in deposition from earlier this year.

Schiller says no, he just didn't remember 10 year old emails and wanted to refresh his memory

 

Schiller was asked about whether Apple decided to only use its own APIs for third party developers instead of also offering APIs from Sun, Adobe, Microsoft, Qualcomm and others 

KF: was your intent to drive your competitors out of the app business?

PS: absolutely not

 

Schiller was asked about an Aug 2008 email to Scott forestall (px 00879) about how Android will be completely open, Schiller says “Idont think we can have anything like their license and business model.”

Q: was this the back and forth about opening ios up to third parties

A: no 

Q: It wasn't a debate about opening up app distribution to third parties?

A: no i dont believe so, says doesn't recall ever having a discussion opening up the app store to third party distribution


Asked about Px505 an email from steve jobs to schiller, forestall oct 2008, Subject “Is google working to target iphone ad market” Jobs wrote “The more energy they devote to ios the better”

KF: You wanted Google to be beholden to apple?

PS:No

KF: You were basking in the power to destroy a company's business?

PS: No


Discussion about an app user who complained that app review was keeping him from playing his favorite games. Schiller says in an email "It all comes down to whether we will ever open up the iPhone for app developers to distribute" on their own.


There was an aug 2016 Verge article about imessage that Schiller forwarded to Cue, Federighi and Joswiak with the comment “imessage as the glue that kept me stuck to the iphone”


Questions about ebooks price fixing case from 2014, where the judge in that case said the conspiracy was at the highest levels of the company. Apple lawyer objects, YGR overrules

PS: If you’re suggesting that I had anything to do with the ebooks case, I did not.

KF shows an article from dec 2014 where cue says he would do it again “but take better notes”


KF: asks about px 0842, an email thread about stopping phishing attacks. In the thread theres an email from dec 2019 from Tim Cook “what could we do that would give us a long term competitive advantage?”

Thread discussed password autofill and Sign in with Apple, two password management methods from Apple. Schiller (I think) wrote they will make the platforms more "sticky" but will have trouble competing with because “the capabilities themselves are unlikely to be protectable differentiators because of heavy users of chrome"

KF asked a series of questions Apple's ability to store passwords will keep users in the iOS ecosystem.

PS: users just have to reset their passwords

KF: you have to do it for every app

Schiller: just do it as needed 

KF keeps pressing to play up the difficulty in relogging into other apps after switching to android, and Schiller says you could use a third-party password manager that works across devices, he says.

 

KF asks PS if he knows about the big App Review Guidelines book, almost like a giant phonebook, for App Store guidelines.

 

“I got one for you,” she says. “Today is your lucky day.”

 

Some quibbling about whether the large binder has officially been entered into evidence. Apple says there are sections they’d like to redact before it is publicly entered and judge allows it in, under the condition that Apple can have a chance to make redactions.

 

KF points to a rule that bans porn or adult stars; or an app when the sole purpose of the app is sex; escort service locators; sex toy catalogs, etc.

 

KF then walks through numerous sex-related apps, including Kinkoo, a BDSM dating app; an “obedience training app;” a BDSM habit training app; a foot fetish app; a “sex positions 3D app.”

“Apple’s getting a 30% commission on any in-app purchase if it’s digital content consumed in the app, right?” she says.

 

Schiller agrees.

 

She points out that some of the apps offer “in-app purchase opportunities.”

 

KF then calls up TikTok, Instagram and Reddit and points to BDSM and porn-related trending topics, accounts and subreddits. She pulls up the Instagram page for PornHub.

 

KS: You know PornHub is a porn site?

 

PS: I do not know that.

 

 

XXX

 

The morning started with Apple lawyer Richard Doren finishing questioning of Apple Fellow (his current title) Phil Schiller.

 

Schiller described the various ways in which Apple helps developers and users to ensure that “people have better software and better experiences,” pointing to Core ML and training and events for developers. Schiller said Apple has built facilities around the world in places like Brazil, Indonesia, Italy and China, to create the next generation of developers “to unleash their visions around the world.”  

 

They then moved to the topic of intellectual property (IP), and how Apple values and protects its IP. Schiller then, with some glee, described how he helped come up with the iPod wheel, during an early generation of the iPod – when it moved from 25 songs, first generation, to 1,000 songs. Would be too hard to just go up or down, so Schiller said that’s when he helped device the wheel.

 

CROSS of Phil Schiller (PS) started with Epic’s Katherine Forrest (KF).

 

KF peppered PS with questions about how Apple’s developer tools (the APIs) work on iPhones, and not web applications. She went through eight examples.

 

“Out of eight, seven of the ones we just talked about, web app developers can’t use,” KF asked. Schiller agrees.

 

KF then says Apple has relied upon “the innovations of many developers,” many of whom are not Apple developers, for open-source software.

 

For example: KF says: Are you aware that if one goes to one’s general settings and scrolls down to Legal and Regulatory and scrolls down to Legal Notice one comes up with (exhibit number) PX1891 which is in your binder. Turn to Attractive Chaos.  “Permission is granted free of charge … any person obtaining this software…”

 

KF cites further examples, to which YGR interrupts to say: Are you arguing that software isn’t copyright-able?

 

KF: She says no. “Our point is Apple is taking total credit for all innovations” and there is a fair amount of third-party, open-source innovations that Apple didn’t create but Apple effectively takes credit for.

 

KF: then calls up exhibits PX79 and PX80 – relating to a 2013 Goldman Sachs Switching Report.

 

KF notes that PS was asked about the report, and Schiller’s sharing the report with other Apple executives, during a February deposition.

 

PS does not remember sending an email to Apple’s Eddy Cue and others calling the report “an interesting report,” but he did, per the email he sent in the exhibit.

 

The Goldman Sachs report pertained to the significant switching costs of moving data from an iPhone to an Android.  

 

KF noted that yesterday PS noted that changes in the industry have mitigated those costs and made switching far easier.

 

XXX

 

Hello. Bobby Allyn here with NPR. In the courtroom with the Information’s Josh Sisco.

 

Questions/concerns: ballyn@... or 570-814-0887

 

Exhibits: http://tinyurl.com/epicvapple

 

Judge Yvonne Gonzalez Rogers (YGR) is wearing a maroon mask.

 

For Epic:

Katherine Forrest

Tim Sweeney

Gary Bornstein 

Justin Clark 

Lauren Clause

Jessica Choi 

 

Apple: 

Richard Doren 

Heather Grenier

Kate Kaso Howard  

Jason Lo

Karen Dunn

Harry Phillips

 

On the stand today: 

Apple executive Phil Schiller

Then Apple’s Michael’s Schmid

 

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