Epic v Apple Day 15 - Daily Pool Report


Acton, Michael (LNG-SFR)
 

Ahoy! This is Mike Acton from MLex. I’ll be your pool reporter for Epic vs Apple trial day 15. Any questions for me – 415 734 7740/acton@.../@MActon93

 

Apple CEO Tim Cook appeared outside the courtroom at around 7:35AM, and said a few cheery hellos to the lawyers. He’s wearing a dark grey suit, plain white shirt with grey tie, black shoes. He’s opted for a clear face shield, no mask. As we wait for proceedings to start, he sits in the back row and looks at his phone briefly.

 

The courtroom feels busier than it has been previously, maybe ten people besides the usual legal teams.

 

Judge Yvonne Gonzalez Rogers appears at 8AM, holding a coffee. She notes the extra people. “I’m going to use my discretion and allow it.”

 

There’s a bit of housekeeping. Forrest notes that Epic has 2 hours 3 minutes left. Apple has 6 hours and 38 minutes. Doren agrees. Then Forrest wants to confirm expert direct testimony has been admitted, which had previously been provisionally admitted – Athey and Cragg. Doren says Apple is fine with that, subject to court rulings. Then Forrest asks for a bit of extra time for them to submit findings of fact – asks for Friday next week. Judge says she’s fine with that, sets a noon deadline. “That way you’re forced to get them done and then you can take a break.”

 

Then we get some very interesting thoughts from Judge Gonzalez Rogers on what she wants to talk about on Monday when we get the back-and-forth between lawyers on key issues in the case. The two sides have offered an agenda.

 

“It is an ambitious agenda, I don’t think we are going to get through it. I think remedies would be interesting to hear about, issues relating to obviously the nature of the market.”

“I don’t need to hear too much with respect to Epic’s approach in the sense that – well I guess as Professor Schmalensee said it’s a tautology – of course they have a monopoly if it’s their thing. The question is whether I accept that argument or not. It is under the law the exception, not the rule. It is the rare case.”

“Issues of substitutes I think are interesting, and will be something that I spend some time on. The lack of competition on the 30 percent is something that is troubling.”

“This is a dynamic market, things are changing rapidly, I have a snapshot. We are at a point in time in a moving stream. So understanding what your perspectives would be for the court’s role in that dynamic environment, that would be interesting to me.”

“Those are questions that I might ask you if I wasn’t forecasting right now.”

“It’s also, there are a lot of facts – I have to go back and check whether there is any substantiation for some of the positions that are being asserted, and I haven’t had the time to do that, obviously.”

 

Here’s my (not completely exhaustive) list of lawyers and execs in the courtroom.

 

Epic:


Katherine Forrest

Gary Bornstein
Tim Sweeney
Lauren Moskowitz

Yonatan Even

Apple:


Richard Doren
Heather Grenier

Kate Adams
Karen Dunn
Phil Schiller
Veronica Moyé 

Kyle Andeer

 

Veronica Moyé from Gibson Dunn questions Cook from 8:15 when he takes the stand. Court goes to break at 10:15.

 

A Brief History of Tim

Cook confirms he became CEO in 2011. Has worked at Apple since 1998. Got a call out of the blue that Steve (Jobs) had come back to Apple and wanted to talk to him about being the operations chief. Has been Senior VP of worldwide operations, executive VP of sale, and COO.

His App Store oversight is “limited in a review capacity.” But he has a role in the “strategic direction of the company, so to some degree, but more on a review basis.”

Apple’s mission “it’s to make the best products in the world that really enrich people’s lives.””We invest like crazy in R&D, have invested 100bn dollars since iPhone development, 50 billion in last three years. In addition to that we have a “maniacal focus on the user and doing the right thing by the customer. Integrate hardware software and services “and we think that we do that better than anyone else”

Commitments to “simplicity, safety, security, privacy are key. Reliability, quality. The things that make the best products in the world.” This focus on security  and privacy “from our point of view is one of the most important issues of the century. If you look at what’s happened today, technology has the ability to sort of vacuum up all kinds of data from people, and we like to provide people with tools to circumvent that.”

App Review and security

Why’s it important? “Because there can be malicious things that occur, things that vacuum up people’s personal data, there can be malware, the list is pretty long of things that can happen.”

Are computer tools able to replace human assessment? I don’t think so, Cook says. Important to have both, but today despite the advancements in machine learning, machine learning will not address all the issues on the app store.

Apple has invested to improve user privacy with ATT (2021), its privacy nutrition label, and intelligent tracking prevention (2017). How do developers respond to these initiatives?

Some applaud it and some are not happy with it. And what you do when a developer disagrees? “We listen, we don’t have a tin ear, but we are making decisions in the best interest of the user.”

Consumer response “overwhelmingly positive, the number of notes I get are truly, truly unbelievably positive.” Consumer surveys Apple carries out show “it’s a very key factor, one of the top factors of why people choose Apple.”

Privacy and security was an iPhone design choice. Apple thought “eventually the threat profile would be much greater on the iPhone because of the number of iPhones that would exist in the market.” App review was introduced in 2008 “because we care so deeply about the safety, security and privacy for our customers.”

It’s much safer than Android and Microsoft. “It’s literally an off the chart level of different,” Cook says. Judge Gonzalez Rogers steps in. “What do you think the third party data shows, you personally?”

It shows from a malware point of view that there’s about 1 to 2 percent of malware on iPhone vs 30 to 40 percent on Android and another 30 to 40 percent on Windows. Third parties just aren’t as motivated about privacy as Apple, Cook says.

Looking at numbers

We’re shown an email chain dated 8 June 2015 between Cook, Matt Fischer to Eddy Cue. They’re discussing a complaint about how Apple’s discovery features aren’t great (PX0089). In the doc, Cook says the note is “poorly written note but we do need to do much more to improve discovery.”

Was an effort made to improve things, Moyé asks? Yes, Cook says, work was already underway.

We’re shown another document – it’s a Form 10-K from Sept 26 2020 (fiscal year 2020) (DX4581). Apple’s R&D spending is going up, Cook testifies, with a 14 percent increase 2019 to 2020. In 2020 it was 18.8 billion.

Now Cook explains how prices on App Store have fallen. About 85 percent of the apps on the app store are free so there’s no commission charged for those. The rest of those are either 15 or 30 percent. The ones that are 15 are the second year and beyond on subscriptions after initial 30 percent. Then the Small Business Program that came in late last year.

“What was in my mind at the time was I was very worried about covid and the effect of covid on small businesses in particular.”

Did Apple consider regulatory issues?

They were “things in my mind, sure. That was in the back of my mind.”

Have competitors responded to that price cut? Yes, it slashed fees. “People were universally pleased with the 30 to 15 percent move.”

He’s on to the economic benefits of the App Store: “I think it’s been an economic miracle,” when I think about the way it started with just 500 apps. There’s almost 2m people in the US that are around the iOS economy, 38bn dollars in commerce in US, half a trillion worldwide. Prices have only gone down for software in general – used to walk into a store and the commission was 60-70 percent.

IAP and switching

Is IAP a payment processor?

“No we have a payment processor it’s called Apple Pay.”

Is there a fee for IAP?

No

“The 15 to 30 percent commission, is that a payment processing fee?”

No, no. Helps Apple efficiently collect the commission – for a number of different things, developer tools, APIs, customer services, payment process itself.

Now on to competition that Apple faces – for mobile devices. “It’s fiercely competitive,” Cook says. Samsung, Huawei, Google, there’s a whole list of different handset competitors.

Does Apple have a dominant share? No not at all, worldwide 15 percent, in the US in the high 30s or so, but clearly not a dominant share. Then in gaming, gets more complex -  Xbox, Playstation, Nintendo Switch. Consoles are competitors to the App Store.

DX3084 is shown – a Kantar ComTech USA Report CQ3/20 – this is a study that was carried out for Apple

Cook – “what is says is that in 2019 to 2020 third calendar quarters, of the percentage who bought an iPhone, between 12 percent to 26 percent of the people switched to Android depending on the quarter.”

Does Apple make it difficult for people to switch? No. They’re working with Google, Facebook and others on a data switching plan. First one being worked on is photos, and so now it’s quite simple to move your photos from Apple to Google. Judge says this needs to be entered into evidence if she is to consider it – it is, a bit later.

We’re shown a Steve Jobs email Oct 24 2010 (recipients blocked out) – he talks about how they need to “tie all of our products together so we further lock customers into our ecosystem.”

“It means making all the products work so well together people don’t want to leave” – Cook explains

There’s also reference in the email to stickiness – “make Apple ecosystem even more sticky”

Same thing, Cook says – “to make the ecosystem have such high grade customer satisfaction that people don’t want to leave.”

PX0416 –  March 2016 email chain with Cook, Eddy Cue – “The  #1 most difficult to leave the Apple universe app is iMessage”

Does Cook agree? No

“I think that means that the setup was done incorrectly because you can easily turn off your iMessage.” Do you believe it has prevented customers from switching? No.

Profits

Do you believe the App Store is profitable? Yes I do, Cook says. But as mentioned in earlier testimony, Apple doesn’t break that down.

Moyé turns to some sealed evidence (that internal email Epic got hold of on the last day of testimony). There’s some panic about allowing it on the screen – Apple lawyers wave frantically – Moyé says she is just talking about the cover sheet and nothing comes up. Phil Schiller places a hand on his chest and gives a (jokey) sigh of relief.

All this stuff is sealed so we rely on Cook describing it to us, sans figures. Epic expert Ned Barnes testified showed fully-burdened operating margins for App Store, is that correct? No. It shows op ex for the company that’s sort of a total, and then it shows only sort of unallocated op ex methodology under it. Does the number for the App Store in the op ex column include all of the associated expenses? No, not at all. Anything for overall op ex for the App Store? No.

Is the operating margin higher than it would be if there had been a fully-burdened analysis? Yes definitely.

Epic’s remedies

“You can imagine if you turned review off how long it would take for App Store to become a toxic kind of mess”

Also terrible for the developer, depends on the store being a safe and trusted place where customers want to come.

What about Apple’s IP rights? What impact? “It seems like it would be forcing us to license our IP and I can’t imagine that.”

Epic also wants an order that no longer require developers to use IAP. What are the consequences.

“It would wind up where customers would then have to add credit card for all of these different apps.” Fraud risk would go up dramatically. “Also we’d have to come up with an alternate way of collecting our commission, and I strongly believe that IAP is the most efficient way to collect it.”

EPIC CROSS-EXAMINATION

Epic’s Gary Bornstein is up to cross-examine Cook.

He starts by digging into those emails about improving the Apple discovery process.

Matt Fischer notes some exciting announcements he would like to be able to make re enhancement of discovery. But at “WWDC 2016, the big announcement was search ads, wasn’t it?”

“And so the big announcement everyone was working for here was another way for Apple to make money off of discovery?” No, says Cook. I believe we also announced the Today tab which also did editorial and really launched a lot of apps

Operating Systems

Probably the highlight of the morning so far. One of the things we’ve been debating is market definition.

“Does Apple compete against Google in Operating Systems?” “We compete against their devices that they enable,” Cook replies. And so we also compete against Samsung, and LG etc.

“So your testimony is that you do not compete against Google on OS?” We benchmark them, Cook says. Now Bornstein brings up a video of a Berkshire Hathaway Shareholders Meeting interview with Cook from 2019.

“We compete on the OS side with Google and Microsoft, we compete in the hardware space with Samsung, Huawei, LG,” Cook says in the video.

There’s an awkward silence. “Was that you in the video?” Bornstein asks Cook.

“It sure looked like me,” Cook replies, with a wry smile. There’s some soft laughter in the room.

Profitability

We’re getting into that question of whether Apple looks at App Store profits separately.

A video is played of Apple’s Kyle Andeer’s testimony in front of Senator Klobuchar in the Senate Antitrust Subcommittee last month.

“When we look at the App Store it’s not a separate standalone business for us, we don’t have a separate profit and loss statement for the App Store,” he says.

Now, a document Epic got in discovery. It was prepared by a Ms. Casey for Cook and his CFO Luca Maestri. Again, it’s under seal so we see nothing on the screen and there are no figures. It’s from September 25 2019.

“And it has on the right side a chart titled ‘services operating margin percentage’ – with a number for the app store, tracked for a five-year period.” Yes. “And again your view is these are not fully burdened numbers.” Yes.

Then discuss R&D calculations. The people who made the document looked at not just direct costs but shared ones as well. There’s lots of accounting questions here in reference to the document we can’t see, so it’s hard to follow closely, but Bornstein is basically suggesting that this is no throwaway document. Cook and Maestri attended a meeting about it.

Another sealed document – same team “have come up again with an operating margin for the App Store which they are again presenting to you and others in the Apple management team.” This document was found in Cook’s files.

Did you know that your counsel produced after discovery was taken, on the very last day of fact discovery? “I don’t know that,” Cook replies.

Google Search deal

Bornstein brings up the deal Apple and Google struck to make Google the default search engine on iOS. That’s of course included in the DOJ and State AG lawsuits against Google for search engine monopoly abuse.

It’s a “very lucrative arrangement,” Bornstein suggests.

“We do so in the best interest of the user,” Cook replies.

It’s a very lucrative arrangement?

“They pay us money.”

They pay you – government claims that they pay you upwards of 10bn dollars

“I don’t remember the exact number.”

Don’t know if it’s upwards of 10bn?

“I don’t know.”

All that just to establish Google search engine as the default. A user can change default on iPhone, correct? Bornstein says: “I have an iPhone, I hope it still works after my examination today.” Cook and others give him a generous laugh.

But it’s sufficiently “frictionful” (a new word from this trial) to be worth Google paying a lot of money to make it the default. “That’s not the way I look at it,” Cook says.

Epic and ‘threats’

Last stretch of this marathon morning testimony. Apple offered Epic the ability to come back to the App Store with Fortnite. If it was such a bad actor, why would Apple invite it back.

You said it benefits users if you prevent malicious activity. But if Epic were the bad actor it wouldn’t be to the benefit of users?

“I think it would be to benefit, if they abided by the rules,” Cook replies. Because the users are caught in between two companies here. When inviting Fortnite back, “we weren’t thinking about the money at all, we were thinking about the user.” (Apple’s Michael Schmid testified this week that Apple made north of 100m dollars from Fortnite)

“It had nothing to do with money”

You testified before congress last year

Has Apple ever retaliated against or disadvantaged a developer who went public about frustrations?

And you maintain still, sir, that Apple did not retaliate against Epic by threatening to shut down Unreal Engine

Correct

And you testify Apple did not retaliate against Down Dog for coming and testifying

I’m not even familiar with that one

Are you familiar with your DPLA?

No, I have a vague knowledge of it. We’re shown the DPLA. Last sentence of 7.1 – which says if Apple determines or suspects a developer has engaged in, encouraged or participated with other developers re. any suspicious, misleading, fraudulent, improper, unlawful or dishonest act or omission, Apple may withhold payments.

Cook says he had no idea this language was added

And the consequences of Apple’s unilateral suspicion is that Apple can withhold payments both to that developer and all affiliates? Yes. And it is contrary to Apple’s culture to retaliate? Yes.s

Is Apple relay “curating a store” with 1.8 million apps? There’s some back and forth over this. Is Cook aware of rival stores that offer more specific sets of apps?

We make sure they adhere to guidelines, Cook says. But you haven’t gone through and selected which ones are valuable to users? “I think you are confusing curation and featuring,” Cook replies.

Are you familiar with Good Old Games for example? SlideMe? No, he’s not.

 

With much-needed help from Dorothy at Law360, here’s what happened when we came back from the break at 10:35AM, and in the afternoon.

Bornstein continues his cross-examination of Sweeney. He points out that users can choose between different browsers and search websites and find “all kinds of horrible” stuff on the internet. “You trust they can tell difference between browsers but not app stores?

Cook: "They’ve never had to do it before, they’ve bought into something that’s just an ecosystem that just works." ...I’m saying I. don’t know.” You’re saying Apple’s “vast marketing machine” couldn’t educate them on the difference, Bornstein asks. Cook says it seems like a complexity they shouldn’t have to worry with. “It’s an experiment I wouldn’t want to run.”

How do you know if you've never given others the opportunity? Cook says he’s giving his business judgment. Customers like safety, security and privacy, and some developers “do like the way that it is.” Some don’t.

Just one? Cook admits there are a few. Would it be surprising no developers testified on behalf of Apple in trial?” After a pause Cook says no, it wouldn’t. And Apple doesn’t have the unique ability to protect users? Cook says Apple rejects 40,000 apps per week, so there’s a lot of work and expertise that have to do with that.

Switching topics – in China, Apple’s iCloud service is part-owned by a Chinese government entity, GCBD. Cook confirms. An Apple doc says: “when iCloud is enabled, your content will be automatically sent to and stored by GCBD. So for these users, data is accessed and stored by a Chinese state owned entity. Cook says this is correct.

And Apple also complies with request to take down apps in the App Store?

Cook: Occasionally we have apps in the App Store that are illegal that we have to remove.

News apps get removed, Bornstein says. “I wouldn’t say it’s a regular occurrence…” Cook says. Apple has to comply with the laws of each jurisdiction it operates in.

Bornstein reads from document: “There are deep perils in Apple operating the only allowed software distribution facility onions, as it allows repressive regimes to demand developer participation in their surveillance and censorship programs, using Apple as a proxy for enforcement.”

A Tim Sweeney (Epic CEO) email from 2019 shows him talking about the decision not to get a Vietnam license for Fortnite because “obtaining the license would force Epic to take actions violation the basic human rights of our users, and would impose censorship” over creative expression.

Cook says he doesn’t take a position on others’ stances in regards to this.

Commission fees

Bornstein shows a video of Senator asking Cook what has stopped Apple from increasing commission fees to 50%. Cook replies in the video that Apple has never increased commission in the store.

It has increased scope of the commission that it applies though, hasn’t it, Bornstein says. Cook appears confused. For example, Bornstein says, developers could offer subscriptions before the commission fee was introduced. “Not to my knowledge,” Cook says.

A February 2009 says developers can pay in-app  without the commission fee, before Apple launched its in-app purchase feature. Cook: “I don’t know, but it’s not clear to me it’s on the store. It looks like it’s in review.” Another email is introduced regarding an ‘Unbound Medicine’ app. No it doesn’t refresh Cook’s memory.

We move to Skyscape, another medical app. Email correspondence indicates that there was a store within the app, Bornstein says. Cook says it’s not clear it’s on the App Store, looks like it’s going through review. And it would be in violation of rules.

Apple instructed this app to change so it instead launches safari for a purchase. So that’s like Apple hanging a sign saying “go purchase this at Best Buy.” I’m not familiar with this email, Cook says.

Bornstein then has Cook clarify about the rules in the App Store about directing users to alternative payment mechanisms, which he have been over enough, so I’ll spare you.

Apple redirect

Veronica Moyé is up again for Apple. She goes back to the discussion about the discovery terms. Was introduction of search ads intended to help with discovery in 2016? It was, Cook says.

Was introduction of search ads intended to help with discovery in 2016? It was, Cook says. And there was a process of removing some surplus apps in the store which would inherently improve discovery. A games tab was also added.

We go back to that deal with Google on making it the default search engine. Does Apple have similar agreements with other search engines with similar revenues? “I believe so,” Cook says. Why does it have this agreement? Google is a good search engine.

We return to the various sealed P&L documents, which are hard to keep track of. But Cook basically clarifies that he doesn’t recall seeing any similar documents since these ones in September 2019. He says he is in a better position to give “meaningful testimony on the meaning” of those documents than Epic’s expert Ned Barnes. Are these figures fully-burdened? No.

On Epic’s offer for Apple to come back – does Cook still consider Epic to be a “malicious” actor? He does. So why did you offer for them to come back? “We thought it would be the right thing for the user – that was a terrible thing to do to them really from the beginning.”

Government rules

There’s a mention of a policy change for the App Store in Japan. Do you know whether or not Japanese law required addition of language? Do you know what motivated these changes to the licensing agreement provision?

“My understanding is there was something in Japanese law that required it,” Cook replies, prompted by Moyé (the judge will pick up on this later).

Do you believe Apple has a unique ability to protect user privacy on iOS devices? “I believe that we do – we know a lot of things to look for, in terms of the OS itself, the results speak for self re. the malware that gets onto the system.”

Now that China question – does Apple gave an option as to whether it can or cannot follow Chinese law? It does not, Cook says. We ship the same iPhone in China as everywhere else, same encryption, other than the cloud piece it’s the same. Apple follows the law in every jurisdiction.

Has the same ATT policy, app nutrition label in China as everywhere else.

We then turn to this question of whether in app commerce was possible before IAP. Does that language in the document to you in app commerce was allowed. The examples given were of apps in violations of Apple’s terms and conditions, Cook says.

Moyé then tries to introduce a news article in relation to the point about Apple having no developers backing it. Epic objects – the article came out while Cook was on the witness stand today. Judge says it’s hearsay, and upholds. There’s other evidence on the record, she says.

RECROSS Bornstein

We have another delve into these P&L documents which we can’t see. One is a benchmarking exercise, Cook says, showing Apple compared with a bunch of companies.

We then talk about this language change in Japan. Bornstein notes that Apple didn’t know before why that change had happened. You remembered only when counsel prompted you? Correct.

Now back to that Google search engine deal. Cook testified you have search related deals with companies other than Google – Bernstein draws up some (undisclosed figures).

“There’s a line that says licensing – that’s your search deals? You can see that the Google number is quite a bit larger than other licensing” deals…

“Yes it is,” Cook says.

Then some back and forth again on the option to buy things in-app before Apple introduced IAP (the reason Epic is hammering this point is because it’s trying to show Apple raised prices by introducing IAP). We look at the Amazon Kindle. Apple allowed Kindle to have purchasing within the app before IAP, right? “Not to my knowledge,” Cook says.

JUDGE’S QUESTIONS

Judge: Mr Cook it was odd to me that you did not remember anything about that termination provision before the break, and it was only by the prompting of your attorney’s question that somehow you remember it

Cook: I remember something happening in Japan where we needed to make a change in the termination clause. That’s the extent of my memory.

Judge: At the beginning of your testimony you indicated that you wanted to focus on users. I’ve seen evidence that a significant portion of revenue from IAP come from gamers. Have you seen evidence to that effect?

And it’s incredibly significant as compared to all other users, revenue is coming from gamers more than from anyone else. Am I right?

Cook: The majority of the revenue on the app store comes from gamers.

Judge: And IAP in particular.

Cook: Correct

Judge: You say you want to give users control

Cook: That’s right, of data.

Judge: So what is the problem with allowing users to have choice, especially in a gaming context, to have a cheaper option for content?

Cook: I think they have a choice today, they have a choice between many different Android models, or an iPhone. That iPhone has a certain set of principles behind it.

Judge: But if they wanted to go and get a cheaper battle pack, or cheaper V-Bucks, and they don’t know that they’ve got that option, what is the problem with Apple giving them that option?

You could also monetise it a different way couldn’t you – I mean that is the gaming industry seems to be generating a disproportionate amount of money relative to the IP that you are giving them and everybody else? In a sense it’s almost as if they are subsidising everybody else.

Cook: You’re right there is some sort of subsidy there. The way I look at that – by having such a large number of apps, it increases the traffic to the store dramatically. Get a much larger audience than they would sell to if there weren’t free apps.

Judge: So your logic is that they don’t get the customer base – it’s more of a customer base, not an IP then?

Cook: It’s both, we have APIs to maintain numerous developer tools.

Judge: Look at banking apps – I have multiple banking apps I haven’t paid for. You don’t charge Wells F or Bank of America – but you are charging the gamers to subsidise Wells Fargo.

Cook: We charge for digital transactions. It’s just a choice of a model. We’ve made a choice, there are clearly other ways to monetise, we chose this one because we think…

Judge: It’s quite lucrative, and it seems to be lucrative and focused on purchase that are being made on impulse basis. That [impulse purchasing] is a different question whether right or not, not really right for antitrust law. But it does appear to be disproportionate.

I understand this notion that Apple is bringing the customer to the game – but after that first interaction, the gamers, the developers of games, are keeping those customers. Apple’s just profiting off that, it seems to me.

Cook: I view it differently than you do, I believe we are creating entire amount of commerce on the store. We do that with a lot of free apps, they bring a lot to the table, we don’t collect commission. And then we have the vast majority of other people on 15 percent.

Judge: Yeah but the 15 percent – you would agree with the basic proposition that competition is good.

Cook: I think it’s great.

Judge: You don’t have competition in IAP though.

Cook: Sure somebody can go and buy on the Sony PlayStation or Nintendo Switch

Judge: Well only if they know, right?

Cook: That’s up to the developer to communicate

Judge: And only if they decide to switch? The issue with the 1m dollar small business program, at least what I’ve seen so far, that really wasn’t the result of competition – the pressure you were feeling.

Cook: Of course we had lawsuits and all the rest of the stuff in our head.

Judge: Ok but it wasn’t competition.

Cook: It was competition after we did ours to 15, made Google drop theirs to 15

Judge: I understand perhaps that Google changed its policy but your action wasn’t the result of competition

Cook: It was the result of feeling like we should do something for small business – small developer

Judge: So when other stores reduced price, Steam, you felt no pressure to reduce your price

Cook: I’m not familiar with Steam and their financial model. One of the thing that’s missed here is there’s a huge competition for developers, in addition to the user. You can imagine if we had an above market kind of commission, people just wouldn’t develop for us.

Judge: I’ve seen evidence in the record, survey of developers, I’m going to share with you the results of this bar graph presented to me – don’t know how accurate, looked for source doc and couldn’t find. Indicated that 39 percent of developers were either very dissatisfied or somewhat dissatisfied with Apple distribution services. 36 percent somewhat or very satisfied. And 19 percent didn’t go either way, in the middle.

So with 39 percent of all your developers dissatisfied, how is that acceptable and how is it assuming those numbers correct that you are again feeling any motivation or incentive to address their needs?

Cook: I’m not familiar with the document you are referencing – friction is what creates a curated experience for users that they are assured safe and trusted. So sometimes the developer and the user are not necessarily intersecting interests.

Judge: It doesn’t seem to me that you feel again real pressure or competition to actually change the manner in which you act to address the concerns of the developers – if these numbers are right.

Cook: I would look at that v differently, we turn the place upside down for devs

Judge: Do you have and again you see the hundred binders behind me – I don’t recall seeing any other surveys or business records showing that you routinely conduct surveys re. developer satisfaction and that you in fact move or make changes.

I take with a grain of salt each side’s anecdotal evidence, what I am looking for is aggregates – do you have

Cook: That’s something Phil [Schiller] better placed to answer.

Judge: You as CEO don’t regularly receive reports

Cook: Correct

After a brief redirect from Moyé re. those P&L statements, we go to lunch break and that’s a wrap on Cook.

Cook leaves the courtroom at 12:30. A squad of cameras are waiting outside for him at the court entrance – he hangs around a bit. Says hello to the courtroom artist who is scribbling away outside.

AFTERNOON

We’re back at 13:15 with Brent Byars from Cravath questioning Apple expert Aviel Rubin, from technical director at the Johns Hopkins University Information Security Institute, which broke off yesterday afternoon.

There are various other ways people can make purchases of digital goods other than IAP, he says. And Rubin had not looked at transaction volume of those payment processors - somebody like PayPal, he suggests.

You haven’t assessed the security of any other payment processing system. And you’re not going to offer an opinion about that in this case? He hasn’t and won’t. It would be possible to analyse whether these are complaint with PCI standard – consumer info. Yes. And he says IAP benefits customers with frictionless experience, minimises amount of effort a consumer has to put in.

Rubin provided the opinion that Epic explored the possibility of using Apple’s enterprise program, as a way to distribute apps essentially via sideloading. Would be important to give testimony based on the complete record.

You see an email from Andrew Grant at Epic, Sweeney – extensive communications among Epic employees describing the fact Epic has an enterprise certificate. Relates to potential use of Apple’s enterprise program. Rubin says he doesn’t remember context but does look like that.

The email says it’s not a goal to syphon money away from iOS but to test whether iOS is an open platform. You believe this statement that the point is not to siphon away money? Rubin says his understanding was that Epic wanted to avoid the commission. Your role as a computer security expert, Bryars says, is not to ascribe motivation. Rubin says he thinks it is part of looking at a security analysis.

Apple then up for a very brief redirect from Jason Lo on the substance of that email, then from Byars.

And that’s a wrap. “The evidentiary portion of this trial is now concluded,” Judge Gonzalez Rogers says. On Monday we’ll get the back-and-forth from counsel “to assist the court in my evaluation of the arguments that are being made.”

“I have a considerable amount of evidence to review in more detail, than just hearing it during trial, and then doing the legal analysis in that framework of the evidence. And what evidence is persuasive” versus what is not.

My decision will be in writing, when all said and done – I am picking a jury on June 7 so I’m in trial and obviously won’t be working on this case. But I am not going to let things sit around, I think it’s important to try to get these things resolved while everything is refreshed.

Will work hard to try and get you a decision as reasonably soon as possible – hopefully before August 13 but you never know.