Epic v Apple Day 5 - Daily Pool Report


Kellen Browning
 

Good morning from Oakland, where we're wrapping up week one of the trial! This is Kellen Browning with The New York Times, and I'm your pool reporter today. I'm sitting next to Elizabeth Lopatto, who is here with The Verge. I'm reachable at 530-312-5216.

Here's the rundown of today's legal teams, with some now-familiar names:

Epic:
Gary Bornstein
Lauren Ann Moskowitz
Lauren Clause
Samantha Bui
Tim Sweeney
(I think I may have missed someone here who was only greeted by the judge as Mr. Run - possibly Jason Run)

Apple:
Richard Doren
Karen Dunn
Veronica Moye 
Lauren Dansy
Kate Adams
Tim Schiller

A class counsel attorney, who helpfully showed Elizabeth and me where to sit, is sitting behind us.

After some housekeeping -- discussions about confusion regarding the numbering of documents and reviewing which documents have been admitted so far and on which day -- Judge Gonzalez Rogers, wearing what appears to be a maroon-colored face mask, seems to be in a chatty mood this morning. 

Before starting, the judge commended both sides for the diversity on their teams:
"We’re now at the end of a week and I wanted to thank and congratulate both your clients and team leadership for the amount of what I would call diversity on your trial teams. This is something that judges here at least in the Northern District, we talk a lot about and try to encourage. I've tried a lot of places and have never seen so much diversity on trial teams. I just thought that you must have thought about it and I wanted to congratulate you and thank the clients as well for really focusing on those issues as important, these are important issues, they affect lots of people, and it's really terrific to see so much diversity in the courtroom, so I thank you."

She also made a joke about the number of Laurens in the courtroom:
"There are a lot of Laurens … it’s really interesting because names do come in waves ... I guess there were a few Laurens when I was going to college but I do know my oldest son has a lot of friends whose names are Laurens."

 Trystan Kosmynka, Apple's senior director of marketing

Apple's Veronica Smith Moye of Gibson Dunn Crutcher is resuming her cross-examination of Kosmynka at about 8:25 a.m. Both are wearing face shields. 

Moye refers to questions from Epic's counsel about Roblox, directing him to PX-305. Moye refers specifically to a note at the bottom of the document, which appears to relate to Roblox being approved for the App Store. The note describes Roblox as a "catalog of free block-style games." Kosmynka wrote "I am surprised this was approved by ERB." (executive review board)

Moye: Did the ERB determine whether Roblox was a store within a store?


Kosmynka: We determined it was not


M: And why was that determination made?


K: As I said yesterday, there’s experiences within Roblox that from our point of review we would not look at as a game, these are configurations that enable a particular experience.


Judge GR breaks in: But isn’t Minecraft a game? 


K: Minecraft itself is a game


GR: I don't understand the distinction you’re making


K: Your honor, in the case of Minecraft, you join the server … there may be a castle already prebuilt … the features and functionality of the overall game itself is not changing, in the same way they could have the world be a castle they could also have the world be a farm, but the mechanics …remain the same … capabilities from security and privacy implications remain the same … these experiences are not capable of doing dynamic things beyond what the creator has already programmed … It's similar to lenses on Snapchat, where you put bunny ears on your face, that’s also an experience, a configuration file as opposed to software that’s downloaded that changes the entire construct of the app.


GR: Alright, go ahead.


M: Mr kosmynka, did the ERB determine that Roblox itself is not a game?


K: Yes, I believe we looked at roblox itself as an app.


M: Is it listed on App Store as a game?


K: I'm not sure


M: Who makes that distinction?


K: The developer


M: In the case of Fortnite, when Fortnite was available on the App Store, was it listed as a game?


K: I believe so


M: Is that because Epic decided to list Fornite as a game


K: Yes


M: You were describing to the court in Roblox context, different features and functionalities. Were you referring to different experiences within roblox?


K: No, referring to features of roblox itself.


A few questions later:


M: What was your conclusion with respect to whether Roblox enabled users to download additional features and functionalities?


K: It’s compliant - it does not introduce new features and functionalities


M: Do you believe allowing a store within a store on the App Store would create safety issues?


K: Absolutely


M: Why?


K: Users when they buy an iPhone, an iPad, they expect to go to the App Store and get safe and trusted apps. There are absolutely cases where whether it be through advertising or other ways, to get in touch with a user so that they can be manipulated into an experience that they think is safe and trusted on the surface and then realize that actually none of the content is reviewed, none of the software is reviewed, and that has severe ramifications for consumer privacy, trust and safety.


Moye next asks Kosmynka a series of questions about TestFlight, including when it was founded (2010) and bought by Apple (2013). She goes into detail asking about Apple's App Review team, and Kosmynka explains various facets of the App Review team, which reviews apps in 81 different languages. He says there are 100,000 average App Store submissions, and about 500 human experts within the app review.

He says app reviewers work 8-10 hours a day, and sometimes get overtime when there is a surge of apps. 

Moye introduces PX-2790, the list of App Store review guidelines. She has Kosmynka give examples of apps that are rejected for various reasons: an app depicting women in "compromised positions" or rape scenes, apps that marketed plastic surgery games to children, copycat apps, and a "challenge" app that gave money for people to complete dangerous dares.

For that last app, Moye asks the name of the developer. He believes it is called Aristika, and says he believes it is part of a member of the Coalition for App Fairness. 

She asks if he believes computer analysis alone can address these issues, and he says no. 

At this point, the judge appears to be the only person not wearing a mask or face shield - she's sipping coffee from what looks to maybe be a Peets cup.

Moye introduces PX-0300, which shows the top 10 reasons apps were rejected in the week of May 6, 2017. The top three reasons were "app completeness" (8,321 removed), "info needed" (4,788) and "spam" (3,623). "In-app purchases" is the 8th most common reason.

There is then a very detailed, technical explanation of the steps for the app review process, both automated and manual. There is discussion of private APIs, static and dynamic tools and methods Apple uses to evaluate apps. At one point, Kosmynka describes a sample photo of an app reviewer's desk with various devices on it, and a half-eaten green apple.

GR: And you provide apples at the front door for everybody to provide for our staff?

K: No, I think that picture is too cute.

Kosmynka testifies that the goal is to review 50% of apps within 24 hours and 90% within 48 hours. One document, DX-4374, shows that Apple was easily meeting these goals during a week in Nov. 2019. Another document, PX-0335, shows a PowerPoint presentation Kosmynka made in 2015, proposing additional support for app reviews. He says he got it and the program has continued to improve. 

More data: 
In 2020, Apple rejected 40% of app submissions, including 215,000 for violating privacy guidelines. He says Apple has rejected a greater percentage over the years because "our system has improved." Overall, 1 million submissions were rejected in 2020, but many later found their way to the App Store after improvements, he says.

Moye: Do you believe Apple is unique in its ability to review iOS apps?


K: Yes


M: Why?


K: From a competitive standpoint, the App Store is regarded as the safest and trusted App Store. The review process itself is regarded as rigorous … I’m not sure how we would do this without apple employees, apple investment and infrastructure. 


M: Is the app review process intended to benefit consumers?


K: Yes, our mission nis to make sure it is a great place for customers to get great apps 


M: Intended to benefit developers?


K: Yes


M: Epic has said the app review process is a sham , a pretext, doesn’t provide security…only for protecting monopoly.


K: I definitely take offense to it being a sham.


Moye concludes at 9:47 a.m. Epic's Lauren Moskowitz is now on redirect. 


Epic's Lauren Moskowitz begins her redirect with Kosmynka, asking him if he thinks Snapchat's bunny ear filters, or TikTok's viral challenges, are games. He does not. 

Then she circles back to Roblox, asking him to define his understanding of a metaverse

K: My own understanding of a metaverse is a a virtual world where you go with your particular character and are with players that you know, players you do not know, and you navigate around that which could include additional worlds and various experiences.


Moskowitz begins a series of rapid-fire questions about Fortnite and there's definitely noticeable tension building in the courtroom. Everyone from Apple's counsel, in particular, is watching very intently.

M: Are you familiar with Fortnite?

K: Yes


M: Have you participated in a Fortnite experience?

K I have.


M: Have you attended Fornite concerts? 

K: no


M: Fortnite is a virtual world where you build a character, correct?

K: I wouldn't refer to Fortnite as a world. I’ve always looked at Fortnite as a game, I don't think of it as a world


M: Are you familiar with/referring to Battle Royale?

K: Yes


M: Have you ever gone to Party Royale? Are you familiar with creative mode or Party Royale?

K: No


M: You're aware that Fortnite holds concerts ?

K: Yes


M: Aware that it streams movies?

K: No


M: Are you aware that users can go to a separate aspect of Fortnite separate from Battle Royale and hang out with their friends?

K: No


Moskowitz switches gears, asking about Uber and Lyft, and about why they were not required to use in-app purchases for their membership subscriptions. She introduces PX-2235, an email related to these discussions. 


M: Why did Apple decide not to require IAP?

K: The majority of those membership are physical services


M: Are you aware that there are other aspects to subscriptions for those memberships that do not involve physical goods being transferred?

K: No


There is then an extended debate over some of the math regarding how many App Store submissions were rejected in 2020. Kosmynka says 215,000 of 7 million apps were rejected for privacy violations. The court then takes a 20 minute recess.


...Moskowitz continues her redirect with Kosmynka, who is certainly more curt with his answers here than he was earlier when he was detailing how App Store security and review processes work.


She introduces PX442 and 446, emails that show that Fortnite's biggest concern about being on the app store was being stuck in review. They are no longer displaying the documents on a large screen for us like they were earlier this morning, but in one of the emails, someone at Apple says "the reality of the situation is we sometimes are that bottleneck" for developers.

Then follows a series of emails introduced by Moskowitz showing examples of times when App Store reviewers missed fraudulent or otherwise dangerous apps, allowing them to make it onto the App Store. In the PowerPoint presentation from earlier (PX335), she points out that there are notes saying "ton of scam apps in store."

In PX2084 (?), a security firm emails to say it has found 17 apps that carry a malicious type of ad-fraud tasks in the background, like continuously opening web pages or clicking links. In an email, Kosmynka concluded "we are making critical errors."

In PX364, the CEO of the Headspace app complained about a litany of copycat apps.

In PX131, a 14-year-old app developer emailed to report a "school shooting game" on the App Store getting reviews like, "The best school shooting game on the App Store #killkids." In the email, Kosmynka said he was "dumbfounded at how this could be missed." 

Around this time, Apple's team is passing text messages around their table for some reason. 

In PX2371, in a June 2020 email chain, there was an app that involved shooting cannons at protesters. Phil Schiller forwarded this email to Kosmynka, saying "WTF."

In PX315, a series of seemingly inappropriate apps still on the App Store are mentioned, including "Waffle - Offensive, NFSW," "Ashley Madison," "Ganja Farm - Weed Empire" and others.

Apple's Moye comes back for re-examination at 11:25 a.m., cleaning up a few things. She and Kosmynka note that the school shooting app didn't actually have players shooting children, but defending the school and other city locations. 

Moye: Do those mistakes cause you to believe that app review is unnecessary?


K: No, it makes me believe that we’ve got to continuously do better. Our customers expect that our store is a safe and trusted place to get apps


Moye asks how the number of problematic apps would change if Apple allowed stores within stores, but Epic objects to this and is sustained. Kosmynka does eventually get to say that without the current system, "I think it would be incredibly dangerous for customers."

Moskowitz comes back at 11:31, pointing out that users can download apps outside the App Store on their Mac computers. Kosmynka says he thinks that carries risk. "I can't say that any customer outside of the Mac App Store has a safe and trusted experience," he says.

The judge has a few questions for Kosmynka. She wonders if other security companies are doing better at monitoring apps than Apple.

"One of the problems with limiting competition, she says, "is that you don't get innovation, or at least it's a possible outcome. So one of the concerns, at least my sense with this lawsuit, is that you're not allowing parties to compete on these topics, then things won't improve."

She asks which competitors or other stores Apple looks at to evaluate security policies (Android is one) and whether it uses third parties to review apps (it does not).

The judge says she is still having a hard time with the distinction between Roblox and Minecraft, and why Kosmynka considers Minecraft a game but Roblox not.

"Logically, if your kid showed you this app and said, 'My friend is playing this, I want to play -- it would seem to me that they want to play a game,'" the judge says.

He's excused at 11:44 a.m., and Epic vice president and general manager of Epic Games store is now on the stand.

Steve Allison 

Steve Allison, the vice president and general manager of the Epic Games store, takes the stand. He is sworn in, wearing a face shield and what I would describe as a military-style (though slightly longer) haircut. The judge interrupts several times throughout his testimony to urge him to slow down so the court reporter can transcribe.

He is examined by Epic counsel, Justin Clarke. (It's possible that not mentioning Clarke may have been an oversight earlier, but I actually believe that he subbed in for a different Epic member who left the room partway through the morning.)

After running through his qualifications, Allison explains the economics of digital game stores. Essentially, Steam had long been the dominant store, and it took a 30% cut of revenue from most developers, he said. But publishers started to become interested in the idea of self-publishing their titles and keeping more of the revenue for themselves.

"The sentiment by 2018 was, fairly broadly, that the 30% could be considered unreasonable," Allison said.

In 2018, Epic launched the Epic Games Store, which takes a 12% cut, in an attempt "to provide as close as possible those self-publishing economics as we could."

Allison said developers were hesitant to leave Steam and become Epic-exclusive, but Epic promised them a safe bet through a deal called a "recoupable minimum guarantee," essentially promising developers that Epic would pay them some amount of money.

The store is not profitable, he said, and operates like a startup, investing and aiming for long-term growth. There are about 500 apps currently available, about 100 developers, 180 million registered PC/Mac accounts and more than 50 million monthly active users. 

Developers do not have to use the Epic payment system to facilitate in-game transactions; "it's a belief system we have," Allison said.

Clarke walked Allison through security measures that the Epic store has, which includes 2-factor authentication and a malicious software virus scan. Allison said there are no known instances of malware or digitally pirated content, and one case of fraud, so far on the Epic Games store.

The judge called a lunch recess that lasts until 1:15 p.m.

Back from lunch, Justin Clarke finishes his direct testimony quickly, pointing to documents that Allison says suggest the Epic Games Store will be profitable in 2024. Allison says EGS is "about 15% ahead" of where it expects to be financially. 

C: How does not being on iOS affect the Epic Games Store? 
A: We are not able to go after that market (mobile games players).

Apple's counsel takes over for cross-examination around 1:20 p.m. I *believe* it is Karen Dunn, though she did not introduce herself. Short, curly brown hair and a face shield.

She takes Allison through the EpicGames.com website, as it is broadcast on screen. She repeatedly -- and at length -- makes the point that there only appear to be games on the store, not other apps. 

Dunn: You testified that nothing different would be required to put a non-game app (on EGS). And yet the first non-game app didn't come to EGS until December of 2020?
A: Yes

That app, Spotify, is part of the Coalition of App Fariness, Dunn notices.

She takes Allison through a description of Fortnite, as detailed on a Epic document (DX5536). She points out that Party Royale and other modes are described in game-like terms.

Much time is spent on the question of whether EGS' 88-12 split is industry standard or not. Allison testifies that it is, but Dunn refers him to his deposition from several months ago, where he agreed that it was "way outside" the industry standard. (On redirect, Allison says Microsoft changing to an 88-12 split on its PC store recently was a big shift.)

On a different topic (Dunn switched topics pretty frequently): "One of the reasons that Epic started EGS was to have cross-pollination between Epic's different businesses, correct?"
A: At a high level, yes.

Dunn then gets into whether the exclusivity agreements were disliked by developers. She notes that one developer in an email (DX4638) talked about the idea that it's anti-consumer to have exclusives. (In redirect, Allison clarifies that the developer was being sarcastic.) Either way, the backlash to this developer led to the developer shutting down their Reddit forum because of angry people. Allison describes those people as "trolls."

Dunn talks about itch.io, a publisher that has its own app store. Epic added itch.io to its store on April 22.

D: Are you aware that itch.io includes so-called adult games such as a game called "Sisterly Lust?"
A: No
She says there are other offensive and sexualized games in the itch.io app store. Essentially, it sounds like Epic allows you to download itch.io, which has its own app store including some of these questionable games.

The judge is a bit confused about the distinction, and asks Allison several questions about whether Epic is sponsoring or allowing this content itself. Allison tries to make a distinction, but this argument from Apple -- about the danger of app stores within app stores -- seems to resonate with GR.

Dunn points to documents (DX3993 and DX3795) that seem to show that Epic revised down how much money revenue the EGS was expected to make in 2024, from a 2019 projection of $1.1bn to a 2020 projection of $836 million. (On redirect, Allison says those slides may have been misleading, inaccurate or not up to date.)

In DX3681, a series of Slack messages, Dunn points to how Allison questioned whether the EGS would be able to handle traffic on August 13th, when it was expecting high volume. That is the day of Project Liberty. (On redirect, Allison says EGS was also offering two free games on that date.)

Other than the aforementioned, nothing super notable from redirect or re-cross.

GR: Did you ever ask anyone who you consider to be more senior to you why you were not advised about Project Liberty?
A: I have not.
GR: Hmm.

Allison is excused at 2:24 p.m., and offers a tiny salute to Epic's next witness, Matthew Weissinger, on his way out the door. 

Matthew Weissinger

Matthew Weissinger, VP of marketing at Epic Games, is sworn in. Another face shield wearer, he has glasses and reddish brown hair. Lauren Moskowitz returns from Epic to question him.

She has Weissinger explain Fortnite, including the various modes. They show a video (PX0067) and he explains all the different content and modes that are available, as well as non-gaming experiences like TV, movies, concerts, and social interactions. 

GR wonders why there aren't four separate apps for the four different Fortnite modes, and Weissinger says that would be a worse experience for users and confusing.

They talk about some notable concerts, like Travis Scott. (12.3 concurrent players live to watch it at peak)

Weissinger on the metaverse:

"It's one of the remarkable things about Fortnite, we're building this thing called the metaverse - a social place. One of the ways I’ve tried to explain it is, think about all of us in lockdown, and how we try to stay socially connected. Some of the most meaningful experiences I've had were logging into Zoom and we had our friends and parents and we celebrate grandpa’s birthday -we have a shared moment together - we connect for a cooking class or a happy hour - we come together in these ways even though we're hundreds or thousands of miles apart."


M: Does Roblox have a Battle Royale equivalent?

W: Yes, Roblox has concerts also and a "creator mode" equivalent.

M: Does Fortnite view Roblox as one of its competitors in all these categories?

W: Absolutely.


They discuss how Fortnite makes money. Fortnite sells V-bucks, a digital currency, so people can buy cosmetics. It also sells subscriptions. Weissinger says that real-money transactions were not available within Fortnite when it was on iOS.


He says users seeking refunds from purchases on iOS had to go to Apple for help, which was a "poor experience."


M: What impact would it have on Epic if it could not offer in-app purchases within Fortnite?

W: It would be devastating, it would completely sink the business in its current form.


M: Can't Epic just offer ads?

W: Philosophically we would never do that -- ads are a terrible experience.


Weissinger says Epic spends $300 million a year marketing Fortnite, and has spent over $1 billion total. He says that effort has been successful. 


Judge GR calls things off at 3:15 p.m., asking what Fortnite is doing for Mother's Day. 

Weissinger doesn't have an answer, but "we're doing something now!" Sweeney says.


GR closes by commending the lawyers, providing instructions about when to deliver sealed documents to her, and wishes mothers in the courtroom and listening from home a happy Mother's Day. 


The trial will resume Monday morning with Weissinger, then move onto expert witnesses.


That's all for me, for now! Amy Miller from MLex and Dorothy Atkins from Law360 will pick things up Monday, May 10. 


--

Kellen Browning

Tech Reporter


The New York Times

620 Eighth Avenue

New York, NY 10018

kellen.browning@...

@kellen_browning

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