'Retitle-Count 8 Summary Part B. Irreparable Harm'

4. Summary

For the reasons set forth above, Epic Games has shown that serious questions exist with respect to its section 1 and section 2 claims against Apple but has not proven a likelihood of success on the merits on this record.

B. Irreparable Harm

As the Court stated in the temporary restraining order: the issue of irreparable harm focuses on the harm caused by not maintaining the status quo , as opposed to the separate and distinct element of a remedy under the likelihood of success factor. Here, once again, the Court's evaluation is guided by the general notion that "self-inflicted wounds are not irreparable injury." 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) ). Further courts generally decline to find irreparable harm that "results from the express terms of [the] contract." See Salt Lake Tribune Publ'g Co., LLC v. AT & T Corp. , 320 F.3d 1081, 1106 (10th Cir. 2003) (no irreparable harm where the alleged harm "results from the express terms of [the] contract"). Quite simply, irreparable harm is harm or injury that cannot be repaired.

1. Fortnite

Epic Games contests the Court's prior determination with respect to Fortnite , namely that no irreparable harm exists where Epic Games chose to breach its agreements with Apple in enacting its own direct IAP system. Epic Games cites to precedent involving affirmative defenses to argue that the Court should not aid in the enforcement of contracts that are anti-competitive and violative of antitrust laws. See generally  McMullen v. Hoffman , 174 U.S. 639, 654, 19 S.Ct. 839, 43 L.Ed. 1117 (1899) ("The authorities from the earliest times to the present unanimously hold that no court will lend its assistance in any way towards carrying out the terms of an illegal contract."); Memorex Corp. v. Int'l Bus. Mach. Corp. , 555 F.2d 1379,1383 (9th Cir. 1977) ("[Courts should] continue to side with the goal of vigorous enforcement of our antitrust laws."); Perma Life Mufflers, Inc. v. Int'l Parts Corp. , 392 U.S. 134, 139, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968) ("[T]he purposes of the antitrust laws are best served by insuring that private action will be an ever-present threat to deter anyone contemplating business behavior in violation of the antitrust laws."); Kaiser Steel Corp. v. Mullins , 455 U.S. 72, 83-84, 102 S.Ct. 851, 70 L.Ed.2d 833 (1982) (enforcement of "private agreements" is subject to "the restrictions and limitations of the public policy of the United States"). Epic Games concedes that these affirmative defenses are procedurally not at issue. Instead, it claims it should "not be penalized for defying Apple's monopolistic edicts" (Mot. at 23 (Dkt. No. 61 at 30)), and that the Court should proactively extend the principle in support of Epic Games’ proffer of irreparable injury.

Epic Games further avers that ongoing harm continues to its reputation, the Fortnite gaming community, and its ongoing ambitions in the creation of a metaverse. In support, Epic Games introduces declarations attesting to a 60% decline in the number of iOS users in Fortnite , and that those who continue to play are doing so for significantly fewer hours per week, given that these players are stuck on earlier version of the game and unable to play with other individuals. (Sweeney Decl. ¶ 22 (Dkt. No. 65).) Next, Epic Games provides records reflecting customer complaints and online comments about the unavailability of Fortnite on the iOS platform. (Id. ¶¶ 25-26, Exs. E-F (Dkt. Nos. 65-5, 65-6); Byars Decl., Ex. Q (Dkt. No. 61-18).) Indeed, Epic Games argues that "[m]any of these customers blame Epic [Games] for being cut off from access to Fortnite. " (Mot. at 27 (Dkt. No. 61 at 34).) Finally, Epic Games includes declarations attesting to difficulty in creating and sustaining a metaverse in the Fortnite community given that it is no longer on the iOS platform.

Epic Games does not persuade. The cited cases are singularly premised on the fact that the consequences from a breach of contract in which the parties are seeking to escape are actually in violation of antitrust laws in the United States.[29] As discussed, the Court has made no such finding in this Order as to Epic Games’ likelihood of success on the merits beyond only finding serious questions as to the merits. This is especially so where the alleged monopolistic practices and conduct concern innovative technology platforms without analogous prior precedent. Moreover, the Court considers countervailing interests in ensuring that antitrust laws are nototherwise stretched into areas that are beyond what is required or contemplated. See Kelly v. Kosuga , 358 U.S. 516, 519, 79 S.Ct. 429, 3 L.Ed.2d 475 (1959) ("Obviously ... federal courts should not be quick to create a policy of nonenforcement of contracts beyond that which is  clearly the requirement of the Sherman Act."); Germon v. Times Mirror Co. , 520 F.2d 786, 788 (9th Cir. 1975) ("The purposes of the antitrust laws deal with promoting competition, not with extending unsatisfactory contractual relationships beyond their stipulated periods of effectiveness.").

In short, Epic Games cannot simply exclaim "monopoly" to rewrite agreements giving itself unilateral benefit. Its other identified bases: damage to its reputation==[30]== and the Fortnite gaming community cannot constitute irreparable harm where such harm flows from Epic Games’ own actions and its strategic decision to breach its agreements with Apple.[31] While consumers are feeling the impact of this litigation, the fact remains: these are business disputes. A putative class action on behalf of all developers on these exact same issues was already in progress when Epic Games breached the agreements. See Cameron , 4:19-cv-03074-YGR. Yet, Epic Games has never adequately explained its rush, other than its disdain for the situation. The current predicament is of its own making. See Second City Music , 333 F.3d at 850 ("Only the injury inflicted by one's adversary counts for this purpose.").[32]

Epic Games remains free to maintain its agreements with Apple in breach status as this litigation continues and ignore what the Seventh Circuit recognized in Second City Music : "[t]he sensible way to proceed is for [Epic Games to comply with the agreements and guidelines] and continue to operate while it builds a record." Id. There is no loss of face if one's goal is to protect its consumers, the Fortnite player base. To assist, the Court even offered to require the 30% be placed in escrow pending resolution of the trial which Epic Games flatly rejected.[33] The refusal to do so suggests Epic Games is not principally concerned with iOS consumers, but rather, harbors other tactical motives. Certainly, no technical issue exists. Epic Games admits that the technology exists to "fix" the problem easily by deactivating the "hotfix." Thus, given the totality of these circumstances, the Court can easily find that the injury Epic Games "incurs by following a different course is of its own choosing."  Second City Music , 333 F.3d at 850. It is self-harm caused by self-help.[34] Accordingly, Epic Games has failed to demonstrate irreparable harm as to Fortnite and the games under the Epic Games developer account.

2. Epic Affiliates

By contrast, with respect to Unreal Engine and the Epic Affiliates, the Court concludes that Epic Games has made a sufficient showing as to the irreparable harm. As the Court previously found:

Apple is hard-pressed to dispute that even if Epic Games succeeded on the merits, it could be too late to save all the projects by third-party developers relying on the engine that were shelved while support was unavailable. Indeed, such a scenario would likely lead to nebulous, hard-to-quantify questions, such as, how successful these other projects might have been, and how much in royalties would have been generated, much less the collateral damage to the third-party developers themselves

Epic Games , 2020 WL 5073937, at 4 (Dkt. No. 48 at 6). Apple does not challenge these prior findings. Indeed, there is ample evidence in the record demonstrating: (1) that the removal of developer tools could have significant irreparable harm to Unreal Engine and to Epic Games and its affiliates; and (2) that Apple's threat to revoke developer tools (SDKs) from Unreal Engine is already having a negative impact on Unreal Engine. (See Sweeney Decl. ¶¶ 38, 40 (Dkt. No. 65); Penwarden Decl. ¶¶ 8-13 (Dkt. No. 64); Byars Decl., Exs. R (Dkt. No. 61-19), S ¶¶ 3-4 (Dkt. No. 61-20).) In this regard, Epic Games could not otherwise be made whole even if victorious at trial. See trueEX, LLC v. MarkitSERV Ltd. , 266 F.Supp.3d 705, 728 (S.D.N.Y. 2017) ("trueEX is likely also to suffer irreparable harm ... [as] some [customers] have threatened to stop doing business with trueEX .... Another client sought to accelerate a number of planned trades ... suggesting that the client did not believe it could do business with trueEX in the future").

Instead, Apple advances three arguments: (1) Apple has a well-established practice of removing affiliated developer accounts and developer tools (SDKs) in similar circumstances based on broad language in the agreements and guidelines (Schiller Decl. ¶¶ 54-55, Ex. C at 2); (2) the harm to Unreal Engine is also self-inflicted harm and cannot be irreparable harm; and (3) Epic Games and/or its affiliates could insert and distribute secret code in Unreal Engine and the other applications remaining on the iOS and macOS platforms.

Apple does not persuade. It is clear from the record that Apple's long-standing practice of removing affiliated accounts based on broad language regarding termination in the relevant agreements and guidelines would generally be permissible. However, as applied to the specific facts, the Court concludes that this matter presents an exception to the ordinary practices. The Court notes that the totality of facts is not overwhelming for either side, but leans towards Epic Games on this topic. On the one hand, facts weighing in favor of Apple  include: the agreements are at-will; the developer accounts for both Epic International and Epic Games list the same taxpayer identification number; a single individual is listed as the registered account holder for both accounts; a single credit card paid for both accounts; share the same test devices; the accounts were renewed within a minute of each other; and Epic International receives customer payments made by iOS Fortnite users who are playing outside the United States. On the other hand, facts weighing in favor of Epic Games, Epic International, and other Epic Affiliates include: each have separate agreements with Apple; each of the Epic Affiliates pays separate consideration (i.e. annual developer fees); all agreements were renewed at separate times; the Epic Affiliates’ agreements have not otherwise been breached; and Epic International has been represented by Epic Games to be a different legal entity despite overlapping financial accounts (e.g. credit cards, taxpayer identification number, etc.). Additionally, despite the inclusion of broad termination language in the agreements, the relevant agreement governing developer tools (SDKs), the Apple Xcode and Apple SDKs Agreement, is a fully integrated document that explicitly excludes the developer program license agreement.

Although it is a close question, the Court finds that, with respect to access to the developer tools (SDKs), Apple's reaching into separate agreements with separate entities appears to be retaliatory, especially where these agreements have not been otherwise breached. Indeed, the form letter first issued by Apple in response to Epic Games’ breach does not mention Unreal Engine or the possibility of Apple revoking the developer tools (SDKs). However, after the commencement of this lawsuit, Apple apparently sent a more personalized letter specifically identifying and targeting Unreal Engine as a consequence of Epic Games’ breach. Significantly, the letter does not otherwise identify or list any other specific application or software at risk from Epic Games or any of the Epic Affiliates. (See Grant Decl. ¶ 27, Ex. C (Dkt. No. 63-3 at 3-4) ("You will also lose access to the following programs, technologies, and capabilities: ... Engineering efforts to improve hardware and software performance of Unreal Engine on Mac and iOS hardware; optimize Unreal Engine on the Mac for creative workflows, virtual sets and their CI/Build Systems; and adoption and support of ARKit features and future VR features into Unreal Engine by their XR team.").) The subtext of the letter where one, and only one, significant product is mentioned evidences that Apple was impermissibly pressuring and retaliating against Epic Games and the Epic Affiliates on Unreal Engine product.

Apple's remaining two arguments are also without merit. Apple has not shown that Epic Games’ breach with respect to Fortnite results in a breach of agreements with Epic International or the Epic Affiliates. In the normal course of business, parties can terminate such at will agreements pursuant to their express terms. Here though, Apple reaches beyond these separate agreements to inflict harm, or pressure, upon Epic Games and the Epic Affiliates. In this regard, the injury cannot be said to be self-inflicted.

Finally, the Court is not persuaded by Apple's exaggerated claims that Epic Games would insert hidden or malicious code into Unreal Engine or its products to damage the iOS platform. The record is devoid of any evidence to support such a finding or inference.[35] To the extent any  valid concern exists, however, it is easily remedied by narrowing the scope of the injunction to permit Epic Affiliates’ continued access to the developer tools (SDKs) and to the App Store only so long as such applications and the Epic Affiliates remain in continued compliance with the terms of the relevant agreements and guidelines.

The Court notes that expanded briefing by Apple on the agreements and its historical practice has made this a closer question than was presented earlier. On balance, however, and in light of the foregoing analysis, the Court concludes that ongoing irreparable harm and significant potential irreparable harm to Unreal Engine exist absent a preliminary injunction.

[29] Epic Games’ citation to Acquaire v. Canada Dry Bottling Co. , 24 F.3d 401 (2d Cir. 1994) is markedly distinguishable. As Apple correctly notes, Acquaire involved a defendant who made after-the-fact changes to its policies, did not even comply with its own stated policy, and the plaintiffs made a showing that they would be driven out of business absent an injunction. Id. at 412. None of these facts are present, where Apple has maintained the same policies since the inception of the App Store, and there is no evidence in the record that Epic Games will be driven out of business based on the unavailability of Fortnite on the iOS platform.

[30] Even reviewing the record before the Court, the Court is not persuaded that Epic Games has suffered reputational harm. Epic Games unleashed a pre-planned and scorching marketing campaign against Apple following its breach of the operating agreements and guidelines. As the Court noted at oral arguments, if anything, it appears Epic Games’ actions have only increased its reputation in the wider community.

[31] It is further difficult to conceive how Epic Games’ own ongoing ambitions in the creation of a metaverse would create a basis for a finding of irreparable injury.

[32] Indeed, Second City Music is illustrative for why Epic Games’ actions cannot constitute irreparable harm. In Second City Music , the plaintiff-appellant challenged a city ordinance as unconstitutionally vague—not merely violative of a statutory regime. 333 F.3d at 847. The Seventh Circuit found that "some real injury may lurk beneath the surface ... but evaluating this possibility requires evidence so far missing from the record." Id. at 850. Likewise, as discussed, the record here is inadequate for the Court to conclude that the agreements and guidelines are violative of antitrust laws such that Epic Games truly has irreparable harm as to Fortnite.

[33] As made apparent at the oral argument, Apple's form letter purportedly banning Epic Games from the iOS platform for a one-year period is no barrier to Epic Games’ return to the iOS platform during the pendency of this litigation. (Dkt. No. 111 at 83-84.) As Apple stated at the hearing, Epic Games is able to return to the App Store under the Court's supervision provided that Epic Games complies with the relevant agreements and guidelines and further pays Apple its commission on the IAP that occurred after the breach on August 13, 2020. (Id. )

[34] Epic Games’ argument that people are incorrectly blaming Epic Games for the unavailability of Fortnite on the iOS platform ignores the record in this matter. The decision of whether to return Fortnite to the iOS platform during the pendency of this litigation rests with Epic Games—not Apple. Indeed, Epic Games has a choice, and it has exercised this choice by weighing its own beliefs and principles as to the alleged illegality of the Apple agreements and guidelines above its interest in continuing to provide iOS users with access to Fortnite. As noted, Epic Games is free to make that choice; but it is Epic Games’ choice nonetheless.

[35] Further, to do so would be tactically disastrous for Epic Games and its affiliates as it would prove Apple's point with respect to its need to maintain its walled garden or closed platform to protect iOS consumers against security attacks.

Moreover, Apple's arguments—that Mr. Sweeney's statements to Apple announcing the breach reflect a risk to the iOS platform—do not persuade. Mr. Sweeney states that should Apple reject its demands for the ability to introduce a separate app market and use a different payment processor, then Epic Games will be in conflict with Apple on "a multitude of fronts - creative, technical, business, and legal - for so long as it takes to bring about change." (Sweeney Decl., Ex. D (Dkt. No. 65-4).) These statements appear hyperbolic, but even a generous reading in Apple's favor does not reflect any intent to harm the iOS platform with respect to the Unreal Engine or the other applications that are under other affiliates’ developer accounts. Indeed, Unreal Engine does not even utilize the App Store or itself offer IAP, as it is a graphics engine available to developers on computer platforms. It is hard to determine how the Unreal Engine would or could be used to try to affect such changes as described in the above cited correspondence.

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