[00:00:00] Speaker 01:
Thank you, Judge Smith.

[00:00:02] Speaker 01:
Thank you, Judge Smith, and may it please the Court.

[00:00:05] Speaker 01:
With the Court's permission, I would like to reserve three minutes of my time for rebuttal.

[00:00:08] Speaker 01:
Very well.

[00:00:08] Speaker 01:
Thank you, Your Honors.

[00:00:10] Speaker 01:
Your Honors, while Apple respectfully disagrees with them, it takes seriously the District Court's findings and regrets that it lost the District Court's respect and trust.

[00:00:21] Speaker 01:
But the fundamental issue before this Court is a legal one.

[00:00:25] Speaker 01:
Whether even accepting the District Court's finding

[00:00:27] Speaker 01:
the district court's new injunction represents a proper exercise of the civil content power.

[00:00:33] Speaker 04:
May I ask you this question?

[00:00:35] Speaker 04:
By my rough count, Apple has asserted 12 claims of error.

[00:00:44] Speaker 04:
Given the brevity of time that we have, I hope that you're going to give us what you think is your best argument

[00:00:52] Speaker 04:
Why in your time yes?

[00:00:56] Speaker 03:
Yes, your honor absolutely I have to say I've got one preliminary question, and you have to and don't excuse me, but

[00:01:02] Speaker 03:
I had a question about jurisdiction.

[00:01:04] Speaker 03:
Yes.

[00:01:05] Speaker 03:
Because in your brief, you indicate there are further proceedings in the district court and you plan further appeals.

[00:01:13] Speaker 03:
Some of them involve privileged documents.

[00:01:15] Speaker 03:
So I guess my question is, one, do we have a final order?

[00:01:18] Speaker 03:
And two, are any of the documents at issue pertinent to this hearing?

[00:01:25] Speaker 01:
Your Honor, we believe you have jurisdiction under 1291 and 1292.

[00:01:30] Speaker 01:
There is an appeal of the district court's new injunction, which provides jurisdiction, and there's appeal of the district court's order resolving all orders from the hearing below.

[00:01:42] Speaker 01:
With respect to the separate ongoing proceedings on documents, those documents aren't directly at issue here, so we think the court does have jurisdiction.

[00:01:50] Speaker 03:
That's what I need.

[00:01:51] Speaker 03:
I read your jurisdictional statement, but I'm still a little puzzled by it, but I understand your position.

[00:01:58] Speaker 01:
Thank you, Your Honor.

[00:01:59] Speaker 01:
Your honors, I'd like to focus on the zero commission rule.

[00:02:02] Speaker 01:
And there are three fundamental problems with that rule.

[00:02:05] Speaker 01:
First, the zero commission rule is a punishment, the antithesis of a proper civil contempt remedy, because it is impossible for Apple to purge that rule no matter what it does.

[00:02:16] Speaker 01:
Second, the zero commission rule contradicts the district courts, this courts, and even Epic's own recognition that Apple is entitled to at least some compensation

[00:02:28] Speaker 01:
for developers access to its unparalleled innovations and its vast user base.

[00:02:35] Speaker 01:
And third, the zero commission rule, like the injunction more generally, is fatally overbroad in so far as it applies to all developers, regardless of whether they are Epic subsidiaries or whether they seek to link out to purchases on Epic's own game store.

[00:02:53] Speaker 04:
Let's assume, are you in though?

[00:02:56] Speaker 04:
that you are correct that because as currently drafted there's no way to purge this and either you have it to have to have it analyzed under a criminal standard or you send it back to the district court for clarification if we do adopt that approach

[00:03:20] Speaker 04:
What would the district court need to do to determine what was, shall I say, a reasonable fee to which Apple would be entitled in a correctly drawn civil injunction?

[00:03:35] Speaker 01:
Right, Your Honor.

[00:03:36] Speaker 01:
So in that instance, I think the court would vacate that aspect of the injunction and send it back and the district court could do what we believe it should have done in the first place, which is modify the injunction to deal with the new circumstances.

[00:03:48] Speaker 01:
that were created after the elimination of the anti-steering rules that were at issue in the prior appeal and which the injunction on its face was limited to.

[00:03:58] Speaker 01:
So at that point, Apple would come forward with an appropriate commission taking seriously what the district court has said and what this court says in its opinion and would be prepared to justify that commission.

[00:04:08] Speaker 01:
I think the central inquiry would look at the value that developers receive

[00:04:14] Speaker 01:
by accessing Apple's platform.

[00:04:16] Speaker 01:
And that's true with respect to in-app or out-of-app purchases.

[00:04:19] Speaker 04:
And how does one measure that?

[00:04:21] Speaker 04:
As you know, in the Google case, which you were not directly involved in but are very familiar with, maybe you were actually.

[00:04:31] Speaker 04:
I was not, Your Honor.

[00:04:35] Speaker 04:
They set up a technical commission, if you will,

[00:04:38] Speaker 04:
to, I guess, Google would select someone, Epic would select someone, they would then select a third, and presumably come up with an, I quote, a reasonable fee.

[00:04:51] Speaker 04:
Is that something that you're suggesting we do recommend that the district court do in this case?

[00:04:57] Speaker 01:
So I don't think you would need to set up a technical commission, Your Honor, although Your Honor could look to other instances for illustration.

[00:05:05] Speaker 01:
But I think what you would do is have a hearing in which both sides could present expert testimony on the question of what an appropriate commission would be.

[00:05:12] Speaker 01:
And that didn't happen below.

[00:05:14] Speaker 01:
The contempt proceedings in this case, which were directed at new circumstances that arose after the elimination of the rules that were the subject of the injunction, what appropriate commission was, what style guidelines would apply, all of the focus of the proceedings below were backward looking in terms of why Apple adopted the plan that it did, a plan that it gave

[00:05:34] Speaker 04:
notice to the district court of uh... right at the outset of its proceedings apple wasn't trying to hide anything and so instead of by it yes sir with respect i don't think judge gonzalez roger looked at it that way i think she did think you were trying to hide something that you reverse engineered what was done to try to get a specific result what we're trying to do it we want to get it right yes sir uh... and

[00:05:58] Speaker 04:
Let's just say, you're entitled to a reasonable commission, presumably for at least your actual costs.

[00:06:07] Speaker 04:
But how do you measure that?

[00:06:09] Speaker 04:
Because the iOS platform is quite complicated.

[00:06:14] Speaker 04:
It's been developed over a period of time, continues to be developed.

[00:06:16] Speaker 04:
I know that from my own gadgets.

[00:06:20] Speaker 04:
How do you measure that?

[00:06:22] Speaker 01:
So again, this is why we would have experts, but I think you would look at,

[00:06:26] Speaker 01:
the value the developers receive because of the tools and technologies that Apple grants them access to, tools that are used in improving and developing apps in the first place, the value of a safe and secure marketplace in which to operate apps, which is something all users of the Apple ecosystem greatly desire, and the value of the access to Apple's vast user base.

[00:06:52] Speaker 01:
All of those items, things, technologies,

[00:06:55] Speaker 01:
have value that economists can place on them, that experts can place on them.

[00:06:59] Speaker 01:
And we would come forward with a commission that we thought was fair and appropriate in that light.

[00:07:04] Speaker 04:
And given the fact that Apple wants to get compensated as soon as they can, are you saying that Apple would have a strong incentive to come forward with a, unquote, reasonable fee rather than just playing games?

[00:07:19] Speaker 01:
Absolutely, Your Honor.

[00:07:20] Speaker 01:
The last thing that Apple wants is to be tied up in further proceedings like this.

[00:07:24] Speaker 01:
and to have to come before this court again.

[00:07:26] Speaker 01:
As I mentioned at the outset, we take very seriously what the district court has already said.

[00:07:30] Speaker 01:
We will take very seriously what this court says in its opinion.

[00:07:34] Speaker 01:
And we have every incentive to go back, propose a reasonable commission, and defend it in a modification proceeding in which experts can be heard on both sides.

[00:07:44] Speaker 01:
I also think, though, the breadth of the injunction itself should be revisited in light of the CASA decision, Your Honor.

[00:07:51] Speaker 01:
This court, in its prior decision, and Judge Smith in your concurring opinion, you honed in on the fact that the harm to Apple, the reason why you had to apply the injunction to other developers, was that Epic was acting as a game distributor.

[00:08:05] Speaker 01:
So you had to apply to other developers.

[00:08:07] Speaker 01:
But what other developers?

[00:08:09] Speaker 01:
The developers that wanted to link out to purchases on Epic's own game store.

[00:08:14] Speaker 01:
Epic doesn't benefit at all if Microsoft can link out to purchases on its own platforms.

[00:08:20] Speaker 01:
You have amicus briefs from Microsoft, from Spotify.

[00:08:24] Speaker 01:
They are not proper beneficiaries of this injunction.

[00:08:27] Speaker 01:
That flies right in the face of the CASA decision, Your Honor.

[00:08:31] Speaker 04:
But don't they, again CASA is relatively new.

[00:08:36] Speaker 04:
Yes, Your Honor.

[00:08:37] Speaker 04:
But how else would one structure an injunction that passes the test of CASA

[00:08:49] Speaker 04:
without incidentally benefiting other people.

[00:08:51] Speaker 04:
If the injunction continues in the way that the district court envisioned,

[00:08:59] Speaker 04:
The primary beneficiary is EPIC.

[00:09:03] Speaker 04:
However, others incidentally benefit as well.

[00:09:08] Speaker 04:
Doesn't that easily fit within what CASA was talking about?

[00:09:11] Speaker 04:
I mean, as you may or may not know, I've written a few things about nationwide injunctions.

[00:09:15] Speaker 04:
I'm very familiar with the whole concept of CASA, and I struggle with how

[00:09:21] Speaker 04:
How an injunction would be drafted that would not at least have an incidental benefit that helped other people and would, in fact, comply with CASA?

[00:09:30] Speaker 01:
What am I missing?

[00:09:31] Speaker 01:
So, Your Honor, I mean, obviously, from CASA, the central goal here is to provide complete relief to Epic.

[00:09:36] Speaker 01:
Epic has made clear throughout this delegation that it wants people to be able to link out to its own Epic's game store to have purchases on that platform.

[00:09:45] Speaker 01:
An injunction that applies to all of Epic's subsidiaries

[00:09:49] Speaker 01:
to any developer that wants to link out to Epic's own platform, the Epic Game Store, provides Epic complete relief.

[00:09:57] Speaker 01:
It does incidentally benefit other developers, but other developers who want to link out to Epic's own game store.

[00:10:04] Speaker 01:
To go beyond that, to open the world, to apply the injunction to everyone else, runs straight into all the problems that CASA creates.

[00:10:10] Speaker 01:
And I think that's consistent with your prior decision, in that in both the majority decision at page 1003

[00:10:18] Speaker 01:
And in your concurring opinion, Judge Smith, you emphasized that the harm was to Epic as a game distributor, and because of its operation as a game distributor, you had to apply the injunction to other developers who wanted to make purchases on Epic's own platform.

[00:10:35] Speaker 04:
And that's... So if I'm following you correctly, you're suggesting that any injunction ought to be limited to Epic.

[00:10:43] Speaker 04:
and not to everybody else.

[00:10:44] Speaker 04:
But would that not then, if it will, open up a whole new series of lawsuits, and people say, well, in Epic you did this, and I'm entitled to the same thing.

[00:10:53] Speaker 04:
We're right back where we started from.

[00:10:55] Speaker 01:
Number one, it would apply to other developers who wanted to link out to Epic's own game store.

[00:11:00] Speaker 01:
So Epic can build its game store.

[00:11:02] Speaker 01:
And it can encourage other developers to go there.

[00:11:05] Speaker 04:
I get your point.

[00:11:06] Speaker 04:
But what I'm what I'm suggesting is that if we did that and told the district court to do that, that somebody else, whomever, they'd say, OK, this is what you did in epic.

[00:11:19] Speaker 04:
My circumstances are identical.

[00:11:21] Speaker 04:
I want the same thing.

[00:11:22] Speaker 04:
And they would sue you all over again.

[00:11:25] Speaker 04:
Is that helpful?

[00:11:26] Speaker 04:
Does that benefit anybody?

[00:11:28] Speaker 01:
So, Your Honor, I think that's a central question the Supreme Court was dealing with with CASA.

[00:11:32] Speaker 01:
And the way that resolved it was to say that in this case, you, the person who's challenging your citizenships, gets relief.

[00:11:39] Speaker 01:
There are others out there, maybe thousands, but they can bring their own suits.

[00:11:42] Speaker 01:
And you're right.

[00:11:43] Speaker 01:
Once there's one decision, that decision will have its force of reasoning, perhaps its precedential force in a circuit.

[00:11:49] Speaker 01:
But it's up to the other developers then to come in to enforce that.

[00:11:52] Speaker 01:
There's a wrinkle here though, Your Honor, which is important, which is that

[00:11:56] Speaker 01:
There was a separate class action brought on behalf of developers generally that settled.

[00:12:03] Speaker 01:
That settlement involved relief which was geared towards ensuring that developers could get information to their users about the out of purchase mechanism for making decisions.

[00:12:18] Speaker 04:
And would this be, if you will, fertile ground for a class action if we limited it to Epic?

[00:12:26] Speaker 01:
So my point, Your Honor, is that that class action would impact the manner in which other developers could obtain relief.

[00:12:33] Speaker 01:
But I think that the central question for the court in this case is, what gives Epic complete relief?

[00:12:38] Speaker 01:
And an injunction that applies to Epic and that requires it applies to any developer who wants to link out to Epic, not Microsoft, not Spotify, they want to link out to Epic.

[00:12:47] Speaker 01:
That provides them complete relief.

[00:12:48] Speaker 04:
I think you wanted to save some time.

[00:12:49] Speaker 04:
I'm taking a little over here.

[00:12:50] Speaker 04:
Yes, Your Honor, thank you.

[00:12:53] Speaker 04:
All right, Mr. Bornstein.

[00:13:03] Speaker 00:
May it please the court, Gary Bornstein for Epic Games.

[00:13:07] Speaker 00:
I'd like to start, if I may, with the conversation that the court had with Mr. Gahr on the issue of what would happen if we went back to the district court.

[00:13:17] Speaker 00:
As I understand the argument from Apple, it would be that we should go back and Apple should have a chance to try again and that the court should have the function of setting a price for Apple's intellectual property.

[00:13:30] Speaker 00:
That's not how things work.

[00:13:31] Speaker 00:
When we were in front of the district court on these contempt proceedings, Apple never once made the argument that a lower price, a different right would be appropriate.

[00:13:41] Speaker 00:
Apple stuck to its guns and argued that it hadn't violated the injunction at all.

[00:13:47] Speaker 00:
In the course of doing so,

[00:13:49] Speaker 00:
Apple misled the district court.

[00:13:51] Speaker 00:
These are the factual findings of the court.

[00:13:53] Speaker 00:
Apple hid things from the court.

[00:13:55] Speaker 00:
Individuals from Apple lied to the court.

[00:13:57] Speaker 00:
To have the opportunity then to go back and say, you know what, let's try again and do something that we never asked the court to do in the first place would be inequitable and not required by cases like McComb and Sea Shepherd and others.

[00:14:11] Speaker 02:
But what does a remand look like to you if we find that the contempt order is overbroad?

[00:14:17] Speaker 00:
Well, I suppose it depends, Your Honor, on exactly what the nature of the over-breadth is.

[00:14:22] Speaker 00:
If we're talking about the commission piece, I think the result would be largely the same.

[00:14:28] Speaker 00:
For one thing, to the extent the issue is one of whether or not this was a punitive remedy, as Apple has argued.

[00:14:37] Speaker 00:
Apple has not identified additional procedures, but there could be the additional procedures that might be required for a punitive sanction, and those could be ordered if this is deemed to be punitive, although obviously that's not our position.

[00:14:51] Speaker 00:
And if the issue is that the

[00:14:58] Speaker 00:
Commission itself is deemed to be overbroad.

[00:15:02] Speaker 00:
I would argue, first of all, Your Honor, that's inconsistent with the initial injunction as it was entered and inconsistent with the record in front of the district court on the reason that the commission was imposed in the first place to evade the injunction.

[00:15:19] Speaker 00:
But if, hypothetically, to take the question from Your Honor about what happens

[00:15:24] Speaker 00:
if we go back, I think that's a huge problem.

[00:15:28] Speaker 00:
And I think it's part of the reason the court doesn't engage in rate setting, because that's exactly the kind of process the court should not go through.

[00:15:38] Speaker 00:
Take, for example, a case like McComb, where the Supreme Court said that it would be an experimentation, a program of experimentation in disobedience to send back

[00:15:53] Speaker 00:
multiple instances of violation, which could keep going and keep going in a form of whack-a-mole.

[00:15:59] Speaker 00:
So let's say we go back and Apple says 26.5% and then the court says, no, that's too high.

[00:16:06] Speaker 00:
Apple says 25%.

[00:16:07] Speaker 00:
The court says, no, that's too high.

[00:16:09] Speaker 00:
This injunction went into effect in January of 2024.

[00:16:15] Speaker 00:
It took 15 months until it was enforced by the district court in the order that's now on review.

[00:16:22] Speaker 00:
to then go back and have further opportunities for Apple to pick a different rate it never asked for at any point in these proceedings before.

[00:16:31] Speaker 04:
I take that point, counsel, but I guess I'm a little bit troubled by what that leads to.

[00:16:37] Speaker 04:
If we take the position of Apple, arguendo, that the way the injunction reads it is a non-purgeable sanction,

[00:16:50] Speaker 04:
Therefore, it has to meet the requirements of a criminal sanction, perhaps a jury trial, proving beyond a reasonable doubt, which did not occur here.

[00:17:00] Speaker 04:
So if that didn't occur, maybe the alternative is you have no injunction at all, and then you start all over again.

[00:17:08] Speaker 04:
The question then is what they've talked about and certainly what the case law seems to suggest is the court can clarify its meaning.

[00:17:17] Speaker 04:
It said it was a civil injunction.

[00:17:19] Speaker 04:
So if it's going to clarify its meaning, then somewhere you have to find what is a reasonable solution.

[00:17:28] Speaker 04:
Apple has the burden in this case to show what it is.

[00:17:31] Speaker 04:
Now, admittedly, they've dragged stuff out and, in my opinion, misrepresented some things that I talked about in my concurrence when they applied to the Supreme Court.

[00:17:40] Speaker 04:
But let's assume that they're straight up this time.

[00:17:43] Speaker 04:
They have a strong incentive to get something.

[00:17:47] Speaker 04:
So isn't that the better solution here?

[00:17:50] Speaker 04:
If you're just saying, hey, you know, this is non-perjurial, so what?

[00:17:55] Speaker 04:
That doesn't work, does it?

[00:17:57] Speaker 00:
Well, Your Honor, I would take issue with two premises of the question.

[00:18:01] Speaker 00:
The first one on the question of whether or not this is, to use the apples phrase, purgeable.

[00:18:07] Speaker 00:
This is not like a fine or a term of imprisonment that's been entered.

[00:18:12] Speaker 00:
This is enforcement of the original permanent injunction.

[00:18:15] Speaker 00:
All permanent injunctions are, quote unquote, non-purgeable unless a party can satisfy the requirements for requesting modification or elimination of the injunction.

[00:18:26] Speaker 04:
Again.

[00:18:27] Speaker 04:
I probably don't have anywhere near the expertise in injunctions that you do, but I know a lot.

[00:18:33] Speaker 04:
And my understanding is that when something is not purgeable, it means you're punishing for something that occurred in the past.

[00:18:41] Speaker 04:
You cannot change it.

[00:18:42] Speaker 04:
It's done, and you have a certain burden of proof that's been done.

[00:18:47] Speaker 04:
Here you have an ongoing sanction, if you will, which means it's

[00:18:52] Speaker 04:
You have to change the purge ability, meaning Apple has to be able to satisfy the terms of the injunction for it to be a civil injunction as opposed to a criminally based injunction.

[00:19:05] Speaker 00:
Right.

[00:19:06] Speaker 00:
So I would take issue with that explanation, Your Honor.

[00:19:09] Speaker 00:
I think what the court has said is exactly right for an extrinsic sanction, like a fine or a term of imprisonment or something like that.

[00:19:18] Speaker 00:
What happened here was not the imposition of an extrinsic sanction.

[00:19:22] Speaker 00:
It was something more restrained, frankly, which is the district court said, you need to abide by the injunction.

[00:19:28] Speaker 00:
And what all the court did was elaborate what the injunction already prohibited.

[00:19:35] Speaker 04:
And what it said was, you can't charge anything at Infinitum.

[00:19:41] Speaker 04:
That's quite a penalty.

[00:19:43] Speaker 04:
We're talking billions of dollars, right?

[00:19:46] Speaker 00:
Your Honor, that is the import of the original injunction.

[00:19:49] Speaker 00:
Maybe it helps to take a step back.

[00:19:51] Speaker 00:
Apple is taking the position that it somehow now is unable to charge for things that it previously charged for.

[00:20:01] Speaker 00:
That's not correct.

[00:20:03] Speaker 00:
The status quo when this injunction was entered and when this court infirmed the injunction is that Apple charged for transactions in an app for digital goods.

[00:20:13] Speaker 00:
It had its commission.

[00:20:14] Speaker 00:
And for all transactions that took place outside an app on the iOS platform, Apple chose not to charge.

[00:20:23] Speaker 04:
Because no one is going to do it, right?

[00:20:28] Speaker 00:
I'm sorry, I missed your honor's question.

[00:20:30] Speaker 04:
They didn't charge because they didn't permit it.

[00:20:32] Speaker 00:
That's incorrect, your honor.

[00:20:34] Speaker 00:
What happened at the time is you could go on to the web, you can make whatever purchase you want outside of an app, and you would not be charged by Apple.

[00:20:44] Speaker 00:
And in fact, Apple argued strenuously at the trial in this matter back in 2021 that developers had the ability to steer users outside the app to make those purchases.

[00:20:57] Speaker 00:
Apple argued that, for example, developers could send emails to users and tell them to go make purchases outside the app.

[00:21:06] Speaker 00:
That was part of their market definition argument and part of their defense of the anti-steering rules to say, hey, you can go make these purchases now.

[00:21:13] Speaker 00:
All that the injunction did, what the district court was trying to accomplish and said it was trying to accomplish, was to make those non-commissioned transactions

[00:21:23] Speaker 00:
easier for consumers to make.

[00:21:25] Speaker 00:
It didn't change which transactions were commissioned and which transactions weren't.

[00:21:30] Speaker 00:
All it did was it eliminated a barrier that Apple had erected that made it harder for users to make those transactions.

[00:21:39] Speaker 00:
So the argument that this is sort of a new kind of transaction that didn't exist before, which is at the heart of Apple's argument, is false.

[00:21:47] Speaker 04:
Well, what was Project Liberty or whatever that was called?

[00:21:52] Speaker 04:
My understanding is that Epic specifically, in this case and in Google for that matter, changed, surreptitiously changed the coding in a way that things would be violative of Apple's contract, if you will.

[00:22:08] Speaker 04:
Did I miss something on that?

[00:22:10] Speaker 00:
There is one important fact that I think is helpful to bring that into context.

[00:22:17] Speaker 00:
What happened in Project Liberty was that a server-side change to the app was made to enable purchases inside of an app.

[00:22:30] Speaker 00:
So in Project Liberty,

[00:22:32] Speaker 00:
a user could go into the app and decide that he or she wanted to make a purchase, and inside the app they would get an option, either buy through Apple or buy through Epic.

[00:22:46] Speaker 00:
This court, the district court, said that Apple could maintain its rules so that in-app

[00:22:53] Speaker 00:
optionality for payments would not be required, and Apple could insist that people could use its payment system.

[00:23:00] Speaker 00:
That's still true.

[00:23:01] Speaker 00:
To this day, under the injunction, anybody who makes a purchase of a digital good in an app on an iPhone uses Apple's purchasing system.

[00:23:10] Speaker 04:
On an iPhone, and that's the key, because then you're using iOS.

[00:23:13] Speaker 04:
And the problem was, if I understand correctly, Epic wanted to, if you will, avoid

[00:23:23] Speaker 04:
some of the very heavy commission that Apple was getting through its then in-app purchases, right?

[00:23:33] Speaker 00:
So Apple to this day continues to have that in-app purchase mechanism.

[00:23:37] Speaker 00:
That hasn't changed.

[00:23:39] Speaker 04:
They're not collecting any commissions now, right?

[00:23:41] Speaker 00:
They absolutely are.

[00:23:43] Speaker 00:
All in-app purchases, Apple is collecting its commissions to this day.

[00:23:49] Speaker 00:
What also has not changed before this case and today, Apple has never, never collected

[00:24:00] Speaker 00:
any commission on purchases made outside of an app.

[00:24:04] Speaker 00:
Apple drew a bright line.

[00:24:05] Speaker 02:
What's changed is they're allowed to steer people, they have to steer people away.

[00:24:09] Speaker 02:
Nothing in the injunction says they cannot charge a commission, does it?

[00:24:13] Speaker 02:
And when has Epic ever argued that prior to this contempt order that they cannot charge a commission?

[00:24:20] Speaker 00:
Well, to be clear, what's changed, your honor is correct, is that Apple has

[00:24:26] Speaker 00:
is no longer able to impose the obstacle that it used to impose to enable people to make these out-of-app transactions.

[00:24:34] Speaker 02:
So what stops them from making a business decision to impose a commission on those transactions?

[00:24:39] Speaker 00:
What stops them, Your Honor, is the injunction.

[00:24:42] Speaker 00:
The injunction was written as all injunctions... On the original injunction?

[00:24:46] Speaker 00:
Absolutely, Your Honor.

[00:24:47] Speaker 02:
Where does it say anything about commissions in that one-page injunction?

[00:24:51] Speaker 00:
The injunction does not specifically mention commissions, that is true, but Apple certainly knew and the record shows that Apple understood that charging a commission posed a serious risk to it in light of the fact, to compliance with the injunction.

[00:25:09] Speaker 00:
They used the phrase compliance risk.

[00:25:11] Speaker 00:
In light of the fact that when the injunction was entered, the district court could not and was not required to

[00:25:18] Speaker 00:
imagine every possible way that Apple might choose to evade the injunction.

[00:25:24] Speaker 00:
The district court said, you have these two guidelines that are in your app review guidelines.

[00:25:30] Speaker 00:
Get rid of them.

[00:25:31] Speaker 00:
Let people, let developers steer their users, and that's all.

[00:25:35] Speaker 00:
And then what Apple did

[00:25:37] Speaker 00:
is it radically changed various aspects of its business in order to evade that command.

[00:25:44] Speaker 00:
The district court doesn't have to predict in advance every single way that Apple might try to evade things.

[00:25:51] Speaker 00:
What the district court did is it said, you need to make this change.

[00:25:53] Speaker 00:
And it wrote it, as district courts always do, against the background of the status quo.

[00:25:59] Speaker 00:
And Apple understood that.

[00:26:00] Speaker 00:
The factual findings are that Apple knew that.

[00:26:02] Speaker 02:
But to coerce Apple to now comply, you're saying that a permanent ban on

[00:26:07] Speaker 00:
commission is appropriate.

[00:26:20] Speaker 00:
concern.

[00:26:21] Speaker 00:
Apple, like in Sea Shepherd, like in Macomb, Apple had the ability to come and see clarification.

[00:26:27] Speaker 00:
Apple chose not to do that.

[00:26:29] Speaker 00:
Apple chose to proceed at risk, which this court and the Supreme Court have previously identified as a risk that an enjoined party takes.

[00:26:38] Speaker 00:
And if it does that, well, then contempt is appropriate.

[00:26:42] Speaker 00:
And the sanction that the, excuse me, the result

[00:26:48] Speaker 00:
of the decision here both to impose a commission in violation of the injunction and then ask to have a second chance after having misrepresented the situation to the district court and to ask essentially for a rate setting proceeding.

[00:27:07] Speaker 00:
That's not how injunction compliance operates.

[00:27:11] Speaker 04:
Let me ask you this.

[00:27:12] Speaker 04:
Your time is almost gone.

[00:27:15] Speaker 04:
I know you disagree with what Apple has said.

[00:27:17] Speaker 04:
I know you don't think it ought to be sent back.

[00:27:20] Speaker 04:
But it would be very helpful to me, certainly the court.

[00:27:24] Speaker 04:
Let's just assume, arguing though for a moment, that this is a non-perjurial situation.

[00:27:29] Speaker 04:
We need to send it back to the district court for clarification.

[00:27:33] Speaker 04:
What do you think should happen

[00:27:36] Speaker 04:
If we did that, what should happen in the district court?

[00:27:41] Speaker 00:
If we were to go back.

[00:27:42] Speaker 04:
Arguendo, that's all it is.

[00:27:43] Speaker 00:
I understand the premise and I understand that you understand that I disagree with the premise.

[00:27:49] Speaker 00:
I do.

[00:27:50] Speaker 00:
I do.

[00:27:50] Speaker 00:
You disagree with the whole thing.

[00:27:52] Speaker 00:
I get that.

[00:27:54] Speaker 00:
If we were to go back in front of the district court, I think the district court has the ability to modify its injunction

[00:28:04] Speaker 00:
on a proper record, which I think it did here, first of all.

[00:28:08] Speaker 00:
Apple had a notice and it had an opportunity to be heard.

[00:28:11] Speaker 00:
This was all in front of Apple, in front of the court, and Apple was aware that Epic was arguing that no commission was appropriate from day one of this process.

[00:28:21] Speaker 00:
That's it for SER 739.

[00:28:23] Speaker 00:
This has been on notice from the beginning.

[00:28:27] Speaker 00:
And if Apple believes there were additional procedures that were necessary for it to

[00:28:32] Speaker 00:
try to demonstrate some other commission.

[00:28:37] Speaker 00:
It should have done that earlier.

[00:28:38] Speaker 00:
But if we're to go back now, if we're to go back now, I think the district court would need to assess the appropriateness of whether a modification of the kind that Apple contends the enforcement order is would be appropriate.

[00:28:55] Speaker 04:
Let's assume further arguendo that the district court concluded that some amount of money

[00:29:02] Speaker 04:
is due to Apple for its intellectual property and any people involved.

[00:29:06] Speaker 04:
How does that work from your perspective?

[00:29:08] Speaker 00:
Your Honor, Apple is receiving compensation for its intellectual property.

[00:29:14] Speaker 00:
All of the in-app transactions continue to be commissioned.

[00:29:19] Speaker 00:
All of the out-of-app transactions continue to be non-commissioned.

[00:29:23] Speaker 00:
Nothing has changed in that respect.

[00:29:25] Speaker 00:
So I need to underscore the premise that Apple is not getting compensation for its intellectual property is a false premise that Apple has put forward as a central position in this appeal.

[00:29:37] Speaker 00:
The only thing that has changed as a result of the injunction

[00:29:40] Speaker 00:
the original one and the current one, is that Apple is no longer able to prohibit developers from steering people to make one type of transaction versus another, a commissioned transaction or a non-commissioned transaction.

[00:29:55] Speaker 00:
That hasn't changed.

[00:29:56] Speaker 04:
Colleagues, either of you have additional questions?

[00:30:00] Speaker 04:
No.

[00:30:00] Speaker 04:
Okay.

[00:30:01] Speaker 04:
Thank you very much.

[00:30:02] Speaker 04:
Appreciate it.

[00:30:02] Speaker 04:
Thank you, Your Honor.

[00:30:03] Speaker 04:
So we now rebuttal time for Apple.

[00:30:12] Speaker 01:
Thank you, Your Honors.

[00:30:12] Speaker 01:
Your Honors, nothing that you just heard justifies the perpetual imposition of a zero-commission rule, which is a non-purgeable punishment in violation of Supreme Court precedent.

[00:30:23] Speaker 04:
So your colleague, Mr. Bornstein, had just told us no further competition is necessary because Apple's being compensated for all in-app purchases other than Fortnite, basically.

[00:30:36] Speaker 04:
Is that correct?

[00:30:37] Speaker 01:
Absolutely not, Your Honor.

[00:30:39] Speaker 01:
I mean, first of all, look at what the district court herself said at 1ER61.

[00:30:43] Speaker 01:
She acknowledged that even in the absence of IAP, Apple was entitled to some compensation for its intellectual property.

[00:30:50] Speaker 01:
And if you think of the user that goes out, that user is still benefiting from Apple's tools and technologies and putting their app on the Apple ecosystem.

[00:31:00] Speaker 01:
The user goes out and it purchases skins for a Fortnite game or the like, and then they're right back onto the Apple ecosystem to play the game on their iPhone.

[00:31:07] Speaker 01:
They're continuing to benefit from Apple, from its innovations, from its vast user base.

[00:31:12] Speaker 01:
So they're absolutely wrong about that.

[00:31:14] Speaker 01:
Jack Machane, you're absolutely right that the district court's original injunction, which in pertinent part is about 31 words, doesn't mention a commission at all.

[00:31:23] Speaker 01:
And my friend was wrong in saying that we were on notice that zero commission was even on the table.

[00:31:28] Speaker 01:
They didn't raise that until the very end of the proceeding.

[00:31:31] Speaker 01:
And a proper contempt proceeding is to enforce the actual terms of the injunction.

[00:31:35] Speaker 01:
I think the Bray amicus brief

[00:31:37] Speaker 01:
lays out very clearly to the court the proper way to handle the situation.

[00:31:41] Speaker 01:
After the original ruling in this case, Apple eliminated the anti-steering rules that were at issue and that are subject to the injunction.

[00:31:49] Speaker 01:
That's undisputed.

[00:31:50] Speaker 01:
The district court recognized it.

[00:31:51] Speaker 01:
They recognized it in the first page of the brief.

[00:31:53] Speaker 01:
Then arose a new world, a new set of conditions.

[00:31:56] Speaker 01:
Apple had never allowed out-of-purchases before because it required in-app purchases.

[00:32:00] Speaker 01:
That was the whole point of the prior litigation.

[00:32:03] Speaker 01:
Of course, in that new world, we would charge a commission

[00:32:05] Speaker 01:
Now we're fighting over an appropriate commission.

[00:32:08] Speaker 01:
We would urge this case, the court, to set aside the district court's penal zero commission rule, set aside the new injunction, send it back for a proper modification proceedings in which both sides can present their arguments and the district court can rule.

[00:32:23] Speaker 04:
But I take it Apple would not contest the fact that it would be unable to charge a commission until the new commission, if you will, was set.

[00:32:32] Speaker 04:
Is that correct?

[00:32:33] Speaker 01:
Well, Your Honor, we've been under this People Zero Commission inappropriate rule for many months.

[00:32:39] Speaker 01:
What I would say is we would take very seriously this Court's decision.

[00:32:43] Speaker 01:
We would urge prompt action by the District Court.

[00:32:47] Speaker 01:
But I don't think that you could say that it would be subject to the continuing injunction that we're prepared to go quickly.

[00:32:54] Speaker 04:
If we take this approach,

[00:32:57] Speaker 04:
Apple has to have an incentive to get a reasonable fee out there rather than dragging it out, right?

[00:33:03] Speaker 01:
Apple has that incentive, Your Honor, and we are prepared to come forward with an appropriate commission and justify it.

[00:33:08] Speaker 01:
Okay.

[00:33:09] Speaker 03:
Other questions?

[00:33:10] Speaker 03:
Just one question.

[00:33:11] Speaker 03:
If we take that procedure, aren't we going down the path of impermissible rule making or rate making that you've criticized?

[00:33:20] Speaker 01:
I don't think so because we wouldn't be, you're not asking the district court to pick a commission to set a rate.

[00:33:26] Speaker 01:
What you would be doing is sending it back so that Apple can resolve a commission on its own and then justify that commission before the court, consistent with the court's prior ruling and this court's decision in this case.

[00:33:37] Speaker 01:
So I don't think that that is inappropriate rate-making in the sense that the court, the cases talk about.

[00:33:44] Speaker 01:
Apple would be justifying its commission, but even if you thought that was concern, that wouldn't be a reason to leave in place the most penal form

[00:33:53] Speaker 01:
injunction possible, a zero commission rule in perpetuity.

[00:33:59] Speaker 04:
Other question?

[00:34:00] Speaker 04:
No.

[00:34:00] Speaker 04:
Thanks to both counsel, we appreciate it.

[00:34:03] Speaker 04:
It's always a pleasure to have learned and experienced lawyers who know what they're doing and we appreciate that and your backup teams.

[00:34:11] Speaker 04:
The case just argued is submitted and the court stands adjourned for the day.