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Ninth Circuit: Judge Erred in Attorney Fee Denial in Apple Antitrust

April 24, 2023 | Posted in : Fee Award Factors, Fee Denial, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fees & Judicial Discretion

A recent Law.com story by Alaina Lancaster, “9th Circ. Finds Epic Failed to Prove Antitrust Claims Against Apple, Reverses Attorney Fee Denial,reports that Apple Inc. is entitled to attorney fees in the antitrust litigation brought by game developer Epic Games Inc. after an appeals court ruling held that the game developer failed to prove the tech giant was a monopolist.  An 87-page majority opinion from the U.S. Court of Appeals for the Ninth Circuit affirmed a district court judgment that the Fortnite maker failed to prove its state and federal antitrust claims against Apple after a May 2021 bench trial. 

The ruling reverses the part of an order from U.S. District Judge Yvonne Gonzalez Rogers of the Northern District of California, who is overseeing the litigation, that denied Apple attorney fees, and remands the issue back to the district court for further proceedings.  Still, Apple was not able to avoid liability under California’s Unfair Competition Law.

The dispute stems from Epic’s August 2020 complaints claiming that Apple and Google LLC have monopolized their app distribution stores and in-app payment processing markets.  Epic filed the lawsuits after the tech giants removed Fortnite from their app stores for adding an in-app purchasing feature in violation of developer licensing agreements.  Apple has argued that it designed a “walled garden,” an integrated and secure ecosystem, to protect consumer trust, security and privacy.

The majority panel found that Gonzalez Rogers erred as a matter of law in defining the relevant antitrust market.  To establish a single-brand aftermarket, the court majority said that plaintiffs must show the following:

  1. The challenged aftermarket restrictions are “not generally known” when consumers make their foremarket purchase;
  2. “Significant” information costs prevent accurate life-cycle pricing;
  3. “Significant” monetary or nonmonetary switching costs exist;
  4. General market-definition principles regarding cross-elasticity of demand do not undermine the proposed single-brand market.

Epic and the district court interpreted court precedent to rely on a different four-part test.  The majority opinion also found that the district court erred in holding that a non-negotiated contract of adhesion, such as the developer licensing agreement, falls outside of the scope of Section 1 of the Sherman Act.

In a footnote, the court said that it had “no opinion” on what portion of Apple’s attorney fees incurred in this litigation can be fairly attributed to Epic’s breach of the developer licensing agreement.