FW: Epic v Apple Day 4 - Daily Pool Report


Leah Nylen
 

 

From: 'Dorothy Atkins' via Epic-apple-pool
Sent: Thursday, May 6, 2021 4:17 PM

 

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I forgot that I was supposed to also send a daily report, so here it is. It's just all of my reports from earlier today compiled chronologically. I hope someone somewhere finds this helpful!  

 

Good morning from Oakland federal courthouse! I'm Dorothy Atkins from Law360 and I'll be your pool reporter. Leah Nulen is here as well (hopefully to let me know if I screw something up). If you have specific q's for me feel free to email me or text: 347-237-3753

 

Judge Gonzalez Rogers is on the bench wearing a purple mask and purple collared shirt under her robe. At counsel table:

 

Epic

 

Katherine Forrest, Cravath
Justin C Clarke, Cravath

Brent Byars, Cravath
Lauren Ann Moskowitz, Cravath
Tim Sweeney, Epic

Lauren Clause, (I believe from Epic, will confirm)

Jason Run? (operating exhibits - he joked to the judge "I don't talk a lot," she replied "well there are a lot of people who aren’t talking in these groups."

 

Apple

 

Karen Dunn, Paul Weiss

Richard Doren, Gibson Dunn

Lauren Dansy, Gibson Dunn

Jason C Lo Gibson Dunn

Heather Grenier, Apple’s director of commercial litigation

 

A class counsel attorney is in the gallery sitting here alongside Leah and I. 

 

Housekeeping Doc production issue

 

Before trial "housekeeping" issue, Epic's Forrest raised an issue about 20 documents Epic wants admitted. Forrest says the documents should be admitted and Apple is trying to exclude docs unfairly which have been produced in the regular course of business. Apple's Richard Doren argues it's a belated "document dump" and 

 

The judge: "What i’m not interested in is document dumps for the sake of document dumps... We aren’t just going to put something out there on the internet which is what you gus are doing at the end of trial. It sounds to me like your just trying to add docs to the box."  The judge noted that the parties have 45 hours each and "yesterday i was wondering if I gave you too much time. I’m not going to allow you to just dump things into the record without actually presenting evidence in trial."

 

Forrest replied that "My concern is that there's been an attempt to keep records out of this case" and this is another example of it. 

The judge said "I have been quite generous. i have not sealed very much but i’m not going to enter evidence in an improper way." Forrsest offered to brief the issue. 

 

 Epic's head of business strategy Thomas Ko is called as the first witness.

 

Epic's head of business strategy Thomas Ko called as the first witness. 

 

 Epic's Brent Byars, Cravath examined on direct.

 

Ko said he joined Epic in October 2019 after working at Samsung on Samsung Pay to work on payment issues at Epic.  He says Epic has grown from accepting 10 currencies to 42 since 2019 and it doesn't do its own payment processing but he says it's secure.

 

"I believe we have made lots of improvement but still there is more room to improve"

 

He said Epic doesn't process payment transactions and he began working on Project liberty, which he said is an attempt to "give customers choices where options aren’t available." Epic solicited RFPs from different payment processors to see where they can improve and as a result Epic's payment processors reduced their fees. 

 

He explained that Epic doesn't store credit card info and global payment processor costs to Epic in 2020 were 4.2 percent on average and 3.5 percent in the US.

 

Note from Leah: "Epic's payment solutions are partnered with several financial companies. Chase's payment tech is used in the US and for global credit card processing. Paypal is also used globally, along with Xsolla and Adyen."

 

Cross by Apple's Jay P. Srinivasan of Gibson Dunn & Crutcher LLP,

 

Srinivasan asked Ko: "Did you know project liberty would involve deceiving apple?" 

Ko replied that "I don’t know what description of deceiving what that means," but he said project liberty provided solutions. Srinivasan pressed Ko on whether he knew that Epic didn't tell Apple about Project Liberty. He said he knew project liberty involved Apple but he didn't know how Epic communicated with Apple about it because that was beyond his role. 

 

"I wasn’t aware of it,"

 

Srinivasan  pointed to an email exchange from December 25 2019 involving tim sweeney about Xsolla payment processor

In his email, Ko said when it comes to payments within a game "outside App Store and google play there is really no truly comprehensive payment solution that does everything needed for a game company"

Ko testified that others could do payments at the time and saying Google and Apple were the only ones is "too much of a statement," but Apple and google had "such dominance" they had more

 

Srinivasan asked Ko "Did you have any personal info in the past ‘issues with improperly using collecting personal info about children under the age of 13’

Ko: "I don’t recall. I was part of the atty privileged team handling request from the FTC."

 

The courtroom was sealed for questioning for about 10 minutes and no other redirect/cross. App Store VP Matt Fischer is next up.

 

Apple App Store VP Matt Fischer testifying on the stand with a face shield, no mask. Navy blue suit with a light blue shirt and a mustard-ish colored tie. They're taking a 20 minute break now.  I'll email when we're back. Should be 10:35 a.m. PST

 

Direct by Katherine B. Forrest, Cravath

 

Epic's counsel began Fischer's examination by pointing to a series of emails and docs. One email reads "there is an epidemic of fraudulent apps in the app store" that attempt to defraud people out of money. Another says "seemingly benign general app then becomes evil."

 

Many of the documents and emails are subject to confidentiality provisions and are not being admitted into the record for the truth of the matter. 

 

Forrest asks Fischer if he was involved in the App Store's creation. He says no, because it was launched in 2008 before he was at Apple, but he's been involved in the ongoing development of App Store App. Forrest then pointed to document that he sent to the "broader organization" that included a Steve Jobs transcript.

 

He said he isn't involved in managing the ad side of apps and doesn't know how the algorithms work in determining which apps come up first in a search for an app on the App Store. "Sometimes there is no advertising, there sometimes there is," he said.

 

Forrest asked Fischer a series of q's about whether he knows of studies that look at whether consumers switch from using iOS to Android due to rising prices or costs of apps. He replied that he's not aware of any of those studies. He also said he isn't aware of the average amount of money a consumer spends on apps bought on the App Store in the life of iphone. "No and i wouldn’t know how to go about that type of analysis or study," he said

 

Forrest pointed to a presentation attached to a July 28 2016 email that said “Developers don’t believe that the app store enables profitability of their apps, enables app discovery or provides tools to successfully market their apps.” She then began asking Fischer on Apple's Executive Review Board, which he sits on. More on that after the break.


Note from Leah on ERB members' names: Phil Schiller, Eddy Cue, Ron Okamoto, Trystan Kosmynka, CK Haun, Ann Thai, Josh Schaffer and Sean Cameron. 

 

More drama over docs

 

Before taking a break, the judge noted that she's admitted certain business records into the record, and if they're not, she wants to be clear on why she's admitting them. "All these things are being published, they're all out there, and non lawyers don’t understand the difference between being admitted from the truth versus being admitted for some other purpose like notice. So i want to nail that down." She said she wants Epic's briefs on the 20 docs that it seeks to admit on what legal purpose they're being admitted.

 

Judge: "I'm asking not to release it before i make a [ruling]

 

Forrest: "And I'm asking for parity"

 

Judge: "I try to be fair to both sides and if you're suggesting that I'm not..."

 

Forrest replied that she's not suggesting the judge has been unfair, she just wants the court to apply the same rulings to similar docs admissions requests made by the other side.

 

We're back from the break. Hopefully this testimony gets a little livelier. I'll send another update at the end of direct.

 

Moving on to cross now by Jay Srinivasan...

 

More direct of Matt Fischer, which just wrapped. 

 

Forrest points to comments that his team received at Apple from App Store app developers surveyed. 

 

The comments include: "search in the app store is still really rough around the edges," App Store is "plagued with outdated low quality apps," "Stop playing favorites, start applying the same rules to all apps and start eliminating junk apps from the app store," "You tend to focus apps that spend a lot of money… don’t focus our on great apps and not on sales or marketing," "For a developer it’s a nightmare," "‘We release every week, when our app is rejected for review entirely unrelated to the changes we made its disruptive and throws off our cadence," "App reviewers are arbitrary and unpredictable and are not consistent among competing apps,"  "Allow developers to issue refunds this is beyond frustrating to us."

 

Forrest points Fisher to an Oct. 2018 email he sent a subordinate titled "App Store Risk/Fraud." He wrote “I need you to take leadership regarding what’s going on with all forms of fraud on the App Store." Fisher acknowledged Apple has been fighting financial fraud in the App Store. "I don't know about since the beginning, but we've been combating and fighting fraud for a long time, yes." Forrest then points Fischer to another email he sent February 10 2012, titled ‘AppStore Fraud gets unbearable” (he didn't read the email content aloud)

 

Fischer acknowledges that Apple identifies "rip off" apps and removes them from the App Store. "we certainly wouldn’t approve them knowing that they were rip offs" He also acknowledged that some apps have money laundering schemes, there are fake apps and fraudulent refunds.

 

Forrest points to an internal email chain he was on from October 2018 that said "Hulu is part of the set of whitelisted developers with access to subscription cancel/refund API" The atty said ‘Whitelisted developers get to do things others don’t correct?" he said yes, but "I certainly don't use that particular word. I find that word offensive."

 

Forrest asks Fischer if he's aware Google Stadia, the cloud gaming service, is shutting down. He said he's not aware and "I know they had some struggles, i’m not sure of the status of it now." He said "I haven’t memorized every app store guidelines," but he said he's aware apps have been rejected for having an alternative payment processing system.

 

In a series of q's, Forrest gets Fischer to concede he's not aware of any studies that look at whether credit cards, or other payment processing systems that have security issues or privacy issues. 

 

Fischer's cross wrapped. Redirect will continue after a 40 minute lunch break. Trial will be back in session at 1:15 p.m.

 

Jay Srinivasan cross of App Store VP Matt Fischer:

 

-He says he's not responsible for security, app review, fraud or privacy at the App Store and he isn't aware of a "plan" at Apple to lock in developers into Apple's payment system. Atty: "Would you be aware of a plan if one existed.

Fischer: Yes"

 

-Fischer says since Apple launched the App Store in 2008 it's grown from 500 apps to more than 200 million apps in 175 countries and the user interface has evolved "substantially" and Apple has redesigned app store multiple times.

 

-Fischer explains Apple's "Today" tab in the App Store, which highlights smaller developers that don't have the marketing or PR teams to help them grow their business. 

 

-Fischer: "What we have done with this redesign has provided a huge boost of support especially for smaller developers." "I might be biased but I certainly think what we do is unique," because he said he hasn't seen other companies provide marketing and support to developers. " We work hard to make the app store attractive for both developers and customers." 

 

-Fischer said Apple started working closely with Fortnite in March 2018 and decided to "revisit" an Apple guideline prohibiting in-app gifting after he met with a Fortnite executive Mark Rein about it. He said in early 2019, Fortnite began organizing an "in game concert" with the DJ Marshmello. He said Apple agreed to promote the Marshmallo concert in its App Store in early feb 2019 and also outside the app store. Last year, Apple and Fortnite did a similar promotional partnership for a Travis Scott concert that was "quite last minute," and then "The teams were working closely together throughout the year on a wide variety of promotions." He said his last meeting with Fortnite was in June 2020 when they talked about growing their business together in light of Epic's acquisition of Houseparty video conferencing app.

 

-When asked his response to Epic Games' CEO Tim Sweeney's email to Apple last summer announcing Epic's plan to cut Apple out of payments in Fortnite, Fischer says: “I was blindsided." 

 

-Fischer said Apple will change its developer guidelines "if it makes sense for all developers, makes sense for customers, makes sense for apple then we update the guidelines."  "Developers are not a shy bunch and yes they give feedback all the time and yes we take the feedback very seriously. And it helps us prioritize features.We welcome all feedback from developers whether it’s positive or negative."

 

-Srinivasan points to a 2016 email Epic's counsel cited during direct. The email was written by an Apple employee who says "Matt feels extremely strong about not featuring our competitors on the App Store." Fischer says that the worker was "very wrong," and the App Store promotes its competitors "all the time." For example, he said Apple promoted video-streaming apps like Peacock, Hulu and Hulu Plus that compete with Apple TV.

 

-Fischer explaining an email of his: "If a developer has an option of sharing a commission or not, why would a reasonable person share a commission?"  On 30% commissions: "We feel justified that we earn our commission for those types of transactions."

 

And we're back. Redirect/recross of Fischer to come.

 

Katherine B. Forrest, Cravath on redirect

 

-Forrest points out that Apple leaked Marshmello's set list before the in-game Fortnite concert, which is why Epic gave Apple short notice about the Travis Scott show. Fischer says he doesn't recall hearing about Apple's alleged Marshmello playlist "leak." "I don’t recall ever hearing that no."

 

-Epic's atty clarified that Marshmello is a DJ not a band. (He had previously referred to the DJ as a band.) Fischer: "That’s my understanding of what he does."

 

-Forrest asks if he knew that the virtual in-game Marshmello concert drew 10 million attendees, which was the largest event ever. He replied he didn't recall that. "I don't think that the people who worked at epic at the time mentioned that to me."

 

-Epic's counsel wants to go through app developer surveys. Apple's counsel Jay S. interrupts saying "we think this whole line of questioning is objectionable." The judge overruled the objection. Fischer said he doesn't remember reviewing most of the surveys Forrest showed him.

 

-Forrest brings up the email from the Apple worker who wrote that he "feels extremely strong about not featuring" Apple competitors in the App Store. Forrest asks if he is aware that Apple is under investigation by EU regulators about self preferencing apps on the app store?

 

-Fischer replies "I have heard of some of those regulatory efforts but i’m not entirely up to speed on it."

 

-No re-cross from Apple

 

Apple's bearded Trystan Kosmynka is on the stand with a face shield, white collared shirt, dark suit and tie.  Epic's Lauren Moskowitz of Cravath Swaine & Moore LLP on direct just wrapped. Cross by Apple's Veronica Smith Moye of Gibson Dunn Crutcher LLP is about to start.

 

On direct

 

-Kosmynka said he became senior director of app review at Apple in 2017 and he's been a member of Apple's Executive Review Board.  He said "I think we love third party apps as customers on the app store" 

 

-He said Apple has hourly and salaried employees who review 50 to 100 apps a day. Epic's counsel asked him if a standard day for a worker is 10 hours, he says some workers in Ireland have an 8 hour day shift. She impeached him, and eventually he conceded a standard day is 10 hours, 5 days a week.

 

-Epic's counsel said "there is always a backlog and submissions of apps to review" and she asked him if the time it takes to review the app is a frequent complaint Apple gets from developers. He replied "No I don’t believe it is." He also said the last time he reviewed an app it took him 5 minutes.

 

-Epic's counsel gets Kosmynka to concede that Apple called complaints by third parties about apps violating Apple guidelines, a "UTB" for "under the bus," as in the press or rival app is "throwing the app under the bus." But Kosmynka says Apple later changed the term from UTB to ARC. 

 

-The UTB issue came up as Moskowitz pointed to an email exchange in July 2017, in which Kosmynka raised concerns about whether Roblox violates the App Store Guidline 3.2.2 which prohibits stores within a store. One of his direct reports tells him it was approved by the ERB. Kosmynka replies "“I am surprised this was approved by ERB” 

 

-Kosmynka concedes that he's not aware of any studies Apple has performed on security issues or commissions on Google Play Store, Huawei store, or 10 cent store, among others. 

 

-Moskowitz repeatedly asks Kosmynka if Apple has "aggressively rejected apps that use third payments to bypass IAP." He replied "I don’t see it that way," she then impeached him with his deposition and he conceded the point. She asked if Apple terminated thousands of developers who have been terminated specifically for using third party payments. "I would disagree with the term 'specifically,'" he replied.

 

-Moskowitz points to an Apple guideline that prohibits apps that are "confusingly similar" to an apple product, and asks if he's aware if anyone at apple was tasked with assessing whether the apps were functionally better than the apple product. He said no, but "We hope they’re better than the apple app."

 

 

  Apple's Veronica Smith Moye of Gibson Dunn Crutcher LLP cross examined Kosmynka

 

Notes on Cross

 

-Kosmynka says Apple's "process when we find hidden features is we try to work with developers to get it corrected." He said many cases an app introduces a third-party payment without knowing, but the "simple presence of a third party payment" wouldn't have resulted in termination of third party accounts.


-Apple's counsel showed a document from Nov. 2017 that showed a week's worth of data on the number of iPad and iPhone apps rejected/accepted. There were a lot of exact numbers but here's a rough breakdown. Total submissions for this particular week 112,501 submissions. Iphone submissions that week: approved 5k new apps/30k app updates and rejected 11k new apps/ 10k updates. Ipad app submissions: approved 4,600 new apps/ 36,500 updates and rejected 7k new apps and 9k updates

 

-The attorney showed a graph on Apple's App review rejection rate: 

Year / Number of app submissions / number of rejections / rejection rate
2017 / 5.177 million / 1.69 million rejections / 33%
2018 / 4.79 million / 1.7 million / 35%
2019 / 4.8 million / 1.74 million / 36%

 

-Kosmynka says "I take all mistakes seriously" but less than 1% of app rejections are appealed by developers and "usually the appeals are upheld."
"i think the number of mistakes are a small fraction of the effectiveness of the overall review process." 

 

-Kosmynka explains how he founded Test Flight, which was later acquired by Apple and he joined Apple as an engineering manager.

 

Moye of Gibson Dunn Crutcher LLP cross examined Kosmynka and has more to go, but trial wrapped for the day and Moye will continue Kosmynka's cross examination tomorrow morning. 

 

Before wrapping the day, Judge Gonzalez Rogers reminds the parties not to show depositions in the courtroom until after she rules on whether the witness who is testifying can be impeached (this is sort of law 101 stuff): "You can’t show them for impeachment until i decide if request for impeachment is proper." The judge also noted that certain emails don't come in without her say so: "I know lawyers think all emails come in, but they don't. at least not in my court."

 

That's all from me for the day folks! Let me know if you need me to clarify something in these notes. And safe travels to the hard-working Leah who will be heading back to D.C. Tomorrow your pool reporter Kellen Browning of the NYTimes who will sit in court alongside Elizabeth Lopatto, Verge. They'll be back here at 8 a.m. I'll be back next week.

 

 

 

--

Dorothy M. Atkins

Senior Courts Reporter

Legal News & Data

+1 (347) 237-3753

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