Judge Rules on Epic Games, Inc.’s Request for Temporary Restraining Order Against Apple Inc.

On Thursday, August 24, 2020, U.S. District Court Judge Yvonne Gonzalez Rogers issued a ruling on Epic Games, Inc.’s request for temporary restraining order against Apple Inc. The order grants Epic Games’ request for a temporary restraining order against Apple from restricting, suspending, or terminating any affiliate of Epic Games from Apple’s Developer Program. However, the order denies Epic Games’ request for a temporary restraining order against Apple’s ban of Epic Games’ videogame, Fortnite, from Apple’s App Store.

Epic Games filed suit against Apple for alleged violations of the Sherman Act, California’s Cartwright Act, and California’s Unfair Competition Law. In its complaint, Epic Games contested Apple’s in-app purchase system because the system prevents Epic Games’ popular videogame, Fortnite, from offering its own in-app purchase system bypassing Apple’s system. Further, Epic Games took issue with Apple’s 30% cut of all application sales and all in-app purchases in Apple’s App Store. Epic Games soon thereafter filed a request for temporary restraining order and publicized news that Apple threatened to terminate all of Epic Games’ developer accounts.

Judge Rogers ruled on the request for temporary restraining order by looking to the four factors outlined in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 20 (2008): a plaintiff must establish that “(1) they are likely to succeed on the merits; (2) they are likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in their favor; and (4) an injunction is in the public interest.”  Further, Judge Rogers evaluated the factors “through the lens of Apple’s actions with respect to (i) Epic Games specifically. . . and (ii) the anticipated suspension/termination of developer rights under other contracts.”

As to the likelihood of success on the merits, Judge Rogers was unable to “conclude that Epic has met the high burden of demonstrating a likelihood of success on the merits, especially in the antitrust context.” However, Judge Rogers did conclude that “serious questions [of facts and law] do exist,” specifically related to the 30% fee Apple collects from application sales and its in-app purchase system. As to the second Winter factor, Judge Rogers made clear that “the issue of irreparable harm focuses on the harm caused by not maintaining the status quo.” Judge Rogers further stated that “self-inflicted wounds are not irreparable injury,” quoting Al Otro Lado v. Wolf, 952 F.3d 999, 1008 (9th Cir. 2020) (quoting Second City Music, Inc. v. City of Chicago, 333 F.3d 846, 850 (7th Cir. 2003)). With respect to Epic Games’ motion as to its games, Judge Rogers found that Epic Games did not yet demonstrate irreparable harm since “[t]he current predicament appears of its own making.” Epic Games admitted that the issue presented by Epic Games’ in-app purchase system could be fixed “easily by deactivating the ‘hotfix.'” However, Judge Rogers found that Epic Games did make a preliminary showing of irreparable harm as to the revocation of the developer tools since Epic Games International, S.a.r.l, a related company based in Switzerland hosting a graphics engine licensed to other developers, “appears to have separate developer program license agreements with Apple and those agreements have not been breached.”

As to the balance of equities factor, Judge Rogers observed that “Epic Games strategically chose to breach its agreements with Apple which changed the status quo. No equities have been identified suggesting that the Court should impose a new status quo in favor of Epic Games.” With regard to the graphics engine and the developer tools, however, Judge Rogers found that the equities weigh against Apple since “Apple has chosen to act severely, and by doing so, has impacted non-parties, and a third-party developer ecosystem.” With regard to the final Winter factor, Judge Rogers addressed the impact on non-parties. As to Epic Games’ gaming requests, Judge Rogers was not persuaded that Epic Games made a sufficient showing “to conclude that [Fornite players eagerly anticipating the game’s return to the iOS platform and the usefulness of videogames as virtual escapes during the coronavirus pandemic] outweigh the general public interest in requiring private parties to adhere to their contractual agreements or in resolving business disputes through normal, albeit expedited, proceedings.” However, concerning the graphics engine and the developer tools, Judge Rogers found that “the calculus changes.” Judge Rogers found the record adequately demonstrated “significant damage to both the Unreal Engine platform itself, and to the gaming industry generally, including on both third-party developers and gamers.” Judge Rogers concluded by stating that “Epic Games and Apple are at liberty to litigate against each other, but their dispute should not create havoc to bystanders.”

Additional Reading

Judge says Apple can block Fortnite but not Epic’s Unreal Engine or developer tools, CNBC (August 25, 2020)

Epic Games, Inc. v. Apple Inc. (Case No. 3:2020cv05640)

Order Granting in Part and Denying in Part Motion for Temporary Restraining Order in Epic Games, Inc. v. Apple Inc. (Case No. 3:2020cv05640)

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