Miscellaneous January Updates

EPIC V. APPLE

On December 31, 2020, the Epic v. Apple dispute we’ve discussed previously continued with the magistrate judge ruling that Apple did not need to produce documents that only involve Apple’s activities outside the U.S. The magistrate found “extraterritorial conduct not directed at the U.S. cannot be a basis for liability,” even though Epic is alleging that Apple has a monopoly on a global market. It seems that during the briefing and hearing on the matter Epic was less than convincing on the question of relevance. From the order:

For a lot of the RFPs at issue, the Court can on its own dream up theories of how foreign conduct might indeed be relevant to claims and defenses under U.S. or California law. But the Court is concerned that the Court is the one dreaming up those theories of relevance.

…

In the adversarial system, we normally leave it to the litigants to advocate for themselves rather than helping one side or the other. Here, where Epic has done nothing more than gesture at a big pile of RFPs and say the word “global,” for the Court to determine that foreign documents responsive to any particular RFP are relevant to claims and defenses under U.S. domestic law would require the Court to write the motion to compel that Epic didn’t write. That doesn’t seem like something the Court ought to do.

Not a ringing endorsement of Epic’s advocacy.

Apple did not come out of the order unscathed either. Epic had requested “Documents sufficient to show actual and projected revenue, costs, expenses, investments (Including research and development) and profits, by year, incurred by, earned by and/or attributed to, Apple’s IAP.” Apparently, Apple stated that it needed time to calculate those amounts, but had already produced some documents showing that Apple already tracks that information. The magistrate was fairly frustrated:

Apple is losing credibility by continuing to assert that it does not have data in the teeth of documents proving that it does. What’s more remarkable is how this is playing out. It’s not the case that Apple makes an incautious statement to the Court and then the Plaintiffs rummage through Apple’s document production to try to find a document that undermines Apple’s representation. Rather, in both this and the prior filing, Apple denied the existence of information in the very same joint discovery letter brief in which the opposing party cited by Bates number a document proving that Apple does have the requested information.

TAPJOY/FTC SETTLEMENT

On January 7, 2021, the FTC reached a settlement with the mobile advertising platform, Tapjoy. Tapjoy serves up offers for users to perform some action in order to receive rewards like in-game currency on behalf of third party mobile game publishers. For example, a user may sign up for an email list and receive game currency. However, many players never received the benefits. Even after hundreds of thousands of complaints, Tapjoy didn’t correct the issues. Although it appears that it was Tapjoy’s partners failing to provide the rewards, the FTC considered Tapjoy’s amplification of the offers and failure to take action when notified to be a violation of unfair and deceptive practices. The settlement requires Tapjoy to “implement screening and testing procedures to weed out advertisers that cheat gamers and developers,” but makes no mention of any sort of monetary damages.

One interesting note is that FTC took the time to warn about the abuse of Apple and Google in the mobile game market, who had almost nothing to do with Tapjoy issue. They stated:

Tapjoy is not the only platform squeezing developers. In fact, the firm is a minnow next to the gatekeeping giants of the mobile gaming industry, Apple and Google. By controlling the dominant app stores, these firms enjoy vast power to impose taxes and regulations on the mobile gaming industry, which was generating nearly $70 billion annually even before the pandemic

We should all be concerned that gatekeepers can harm developers and squelch innovation. The clearest example is rent extraction: Apple and Google charge mobile app developers on their platforms up to 30 percent of sales, and even bar developers from trying to avoid this tax through offering alternative payment systems. While larger gaming companies are pursuing legal action against these practices, developers and small businesses risk severe retaliation for speaking up, including outright suspension from app stores – an effective death sentence.

This settlement statement is an odd platform for FTC to make such a strong statement.

BLIZZARD SUED FOR WIRETAPPING

We missed this case in 2020, but in November a putative class action was filed against Blizzard for Blizzard’s use of a mouse tracking tool on its website (Sacco v. Blizzard and Mouseflow, No. 20-at-1155, E.D. Cal. ). In essence, the plaintiff claims that Blizzard’s practice of tracking user movements on its website (via Mouseflow software) amounts to wiretapping in violation of the California Invasion of Privacy Act. This is one of a number of similar cases filed by the plaintiffs’ firm Bursor & Fisher. One hurdle for plaintiffs will be that Blizzard’s Online Privacy Policy (at least as of October 22, 2020) identifies the presence of tracking technology and lists Mouseflow specifically in the listed marketing partners linked below:

Blizzard and our partners, such as marketing partners and analytics providers (listed here), may use tracking technologies such as cookies, beacons, tags and scripts. These technologies are used in analyzing trends, administering the websites, tracking users’ movements around the websites, and to gather demographic information about our user base. We may receive reports based on the use of these technologies by these companies on an individual and aggregated basis.

(emphasis added).

[h/t to Rick Zou for bringing this case to our attention]

GAME PUBLISHERS FINED IN EU

On January 20, the European Commission fined Valve, Bandai Namco, Campcom, Focus Home, Koch Media, and ZeniMax € 7.8 million for their practices of restricting cross-border sales of video games within the European Economic Area (EEA). The main issue is that Steam allowed publishers to set different pricing within the EEA, for example, lower pricing in Romania than in Ireland, and then to block users from the more expensive regions from purchasing and activating the lower-priced versions. We’ll see where prices end up across the EEA (i.e. closer to Romania’s or closer to Ireland’s), but regardless I imagine there will be pricing parity going forward.

ANOTHER CD PROJEKT CLASS ACTION

We previously discussed a class action filed against CD Projekt for allegedly misleading statements made prior to the release of Cyberpunk 2077. On January 14, a separate but similar suit was filed against CD Projekt, also in the Central District of California (Hain v. CD Projekt SA, 21-cv-00354 (C.D. Cal.)). I’d imagine that these cases will end up consolidated, but we’ll be keeping an eye on them going forward.

VALVE CLASS ACTION

And to round out the month, a new class action lawsuit was filed against Valve and five video game publishers, CD Projekt (not a great couple months for CD Projekt and class action lawsuits), Ubisoft, kChamp Games, Rust, and Devolver. Colvin et al. v. Valve et al., 21-cv-00801 (C.D. Cal.). Plaintiffs allege that Valve, in concert with the video game companies, abuses its power to keep video game prices high in violation of antitrust law. In particular, plaintiffs argue that Valve requiring game publishers to agree to a most favored nations clause (which means that game publishers can’t offer better terms such as lower prices to other platforms) in order to publish games on Steam is an abuse of power.