Apple countersues ‘Fortnite’ maker Epic Games

Apple has swung back at Epic Games in a counter-lawsuit accusing the software developer of duplicity and greed

Gaming fans play "Fortnite" at the 2019 E3 games expo in Los Angeles. Picture: AFP.

Apple has swung back at Epic Games in a counter-lawsuit accusing the software developer of duplicity and greed, intensifying a legal battle over the iPhone maker’s online software store that could reshape how the marketplace operates.

At the core of the dispute is how much control Apple exerts in the expansive world of smartphone apps that have changed how modern life operates and ushered in the platforms for everything from home entertainment and video games to on-demand food ordering and ride hailing.

Epic sued Apple as well as Google last month after the tech giants yanked the popular “Fortnite” video game from their app marketplaces, calling the power both companies hold over developers monopolistic. Apple and Google removed the game after Epic introduced an in-app payment system in violation of their rules that would cut out both companies from receiving a 30 per cent cut of users’ spending.

In filed court documents, Apple defended its actions and went further, asking a federal judge in California to award punitive damages and restrict Epic from continuing what it describes as unfair business practices.

“Epic’s lawsuit is nothing more than a basic disagreement over money,” Apple said in its filing. “Although Epic portrays itself as a modern corporate Robin Hood, in reality it is a multi-billion dollar enterprise that simply wants to pay nothing for the tremendous value it derives from the App Store.”

An Epic spokesman declined to comment beyond what the company has said previously about fighting what it describes as a system that suppresses competition and inflates prices.

While Epic and Apple seek to litigate their dispute, the game maker has filed a motion seeking to get Fortnite back in the App Store while that fight continues. A hearing is scheduled for Sept. 28 US time.

“All Epic seeks is for the court to stop Apple from retaliating against Epic for daring to challenge Apple’s misconduct,” Epic said in last week’s filing.

Epic is the latest company to take issue with Apple’s control of the App Store, which is part of the Cupertino, California-company’s evolution to expand beyond selling hardware and to generate revenue from software services.

(FILES) In this file photo boys sit on pillows outside during the 2019 Fortnite World Cup Finals - Round Two on July 27, 2019, at Arthur Ashe Stadium, in New York City. - The maker of video game sensation "Fortnite" on August 13, 2020 sued Apple for the way it rules over the App Store, accusing the iPhone maker of wielding monopoly power. Epic Games called on a federal judge to order Apple to stop its "anti-competitive conduct" and invalidate the tech giant's rules requiring app developers to pay 30 percent of transactions as the price of doing business in the App Store. (Photo by Johannes EISELE / AFP)

Apple’s App Store in the first seven months of this year generated nearly $UJS39 billion in global revenue from in-app purchases, subscriptions and premium apps, according to researcher Sensor Tower. After its launch in 2008, the App Store has about one billion customers from 175 countries.

Apple is facing antitrust probes from governments in the US and Europe while other tech companies from Microsoft to Spotify have joined in complaining publicly about app marketplace practices. Last month, Facebook CEO Mark Zuckerberg said in a webcast with employees that Apple has the ability to block innovation and “to charge monopoly rents”, according to a person familiar with the matter.

Apple hasn’t commented on Mr Zuckerberg’s remarks. In response to regulatory probes, Apple has denied hurting rivals and said it wants apps that compete with its services to thrive.

In its filing, Apple sought to portray itself as a victim of plotting by Epic. The tech giant described all the help it had given Epic in recent years and detailed how it alleged the game company had begun laying groundwork for what Apple called a “calculated and pre-packaged campaign” against it.

“Fortnite” has been downloaded almost 130 million times since being added to the App Store in 2018, according to Apple. Epic has earned more than $600 million from its relationship with Apple, according to court records.

Epic chief executive Tim Sweeney in late June emailed Apple executives, including CEO Tim Cook, asking for a special agreement exempting his company from existing contractual obligations, including the App Store payments, according to Apple’s filing. The tech giant rejected that demand.

Then on August 3, Epic sent to the App Store an update of “Fortnite” that the game company described as a “hotfix” but that Apple claimed was a Trojan horse allowing it to bypass Apple’s review process and payment system.

At around 2am. August 3 PDT, Mr Sweeney emailed Apple again. “Epic will no longer adhere to Apple’s payment processing restrictions,” he wrote, according to the filing. Mr Sweeney declined comment on Apple’s latest filing.

A few hours later, Apple said, Epic activated the external payment workaround that cut Apple out of its share of sales. “Epic sought to enjoy all of the benefits of Apple’s iOS platform and related services while its “hotfix’ lined Epic’s pockets at Apple’s expense,” Apple said in its filing.

That was followed by a public relations battle and lawsuit against Apple. Epic showed a video on “Fortnite” mimicking the iPhone-maker’s ‘1984’ ad campaign.

Apple has defended its take of app purchases in the past as a way to help fund the development of its ecosystem that provides a safe and secure way to download third-party software. The company said in its filing that Apple requires every app on its system to undergo a “rigorous, human-assisted review.”

It noted that Epic has its own app marketplace where it charges a commission as well, though Epic takes only a 12 per cent cut of sales. “There is nothing anticompetitive about charging a commission for others to use one’s service,” Apple said in the filing.

Epic said last week that it remains committed to the legal fight but that its business has been harmed in recent weeks. The company said daily active players using Apple’s mobile operating system, or iOS, of “Fortnite” — which Epic said has more than 350 million registered users — has plummeted since the dispute began and its reputation with consumers has been harmed.

Though “Fortnite” can be played on mobile devices as well as gaming consoles and personal computers, Epic said iOS players represented the largest segment of users.