Case 4:20-cv-05640-YGR Document 346 Filed 02/18/21 Page 1 of 9
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`UNITED STATES DISTRICT COURT
`IN THE NORTHERN DISTRICT OF CALIFORNIA
`OAKLAND DIVISION
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`Case No. 4:20-cv-05640-YGR-TSH
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`Case No. 4:11-cv-06714-YGR-TSH
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`Case No. 4:19-cv-03074-YGR-TSH
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`JOINT DISCOVERY LETTER BRIEF
`REGARDING APPLE’S SUBPOENA TO
`NON-PARTY VALVE CORPORATION
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`EPIC GAMES, INC.,
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`Plaintiff, Counter-
`defendant,
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`v.
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`APPLE INC.,
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`Defendant,
`Counterclaimant.
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`IN RE APPLE IPHONE ANTITRUST
`LITIGATION,
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`DONALD R. CAMERON, et al.,
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`Plaintiffs,
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`v.
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`APPLE INC,
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`Defendant.
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`The Honorable Thomas S. Hixson
`San Francisco Courthouse
`Courtroom G, 15th Floor
`450 Golden Gate Avenue
`San Francisco, CA 94102
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`Dear Magistrate Judge Hixson,
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`Apple Inc. (“Apple”) and non-party Valve Corporation (“Valve”) respectfully submit this joint
`letter brief regarding Apple’s subpoena requesting the production of documents by Valve.
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`Counsel for Apple and Valve (“the Parties”) have met and conferred telephonically and exchanged
`correspondence in a good faith effort to resolve outstanding disputes. The Parties have been unable
`to reach an agreement and therefore submit this joint letter pursuant to Judge Hixson’s standing
`order and Local Rule 37.
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`Case 4:20-cv-05640-YGR Document 346 Filed 02/18/21 Page 2 of 9
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`Respectfully submitted,
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`McDERMOTT WILL & EMERY LLP
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`FOX ROTHSCHILD LLP
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`By:
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`/s/ Michelle Lowery
`Michelle Lowery
`Attorneys for Defendant Apple Inc.
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`/s/ Gavin Skok
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`Gavin Skok (pro hac vice to be
`submitted)
`Jaemin Chang
`Attorneys for Non-Party
`Valve Corporation
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`By:
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`Case 4:20-cv-05640-YGR Document 346 Filed 02/18/21 Page 3 of 9
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`I. Apple’s Position:
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`a. Relevant Background
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`As the Court’s preliminary injunction ruling makes clear, Epic’s various mobile and non-mobile
`distribution options are central to disputed issues of market definition and market power. See Case
`No. 20-cv-05640-YGR, Dkt. 118 at 18 (observing that Fortnite’s “multiplatform nature” suggests
`other (or all) digital distribution channels “may be economic substitutes”). Valve’s digital
`distribution service, Steam, is the dominant digital game distributor on the PC platform and is a
`direct competitor to the Epic Game Store. See Nick Statt, Epic vs. Steam: The Console War
`Reimagined on the PC, The Verge (Apr. 16, 2019), https://bit.ly/3oM9uhT. Epic, like other game
`developers, could distribute Fortnite on Apple’s App Store, the Epic Games Store, Valve’s Steam,
`or through various other digital distribution channels. As a result, in November, Apple served
`Valve with a document subpoena seeking documents relating to Steam. See Ex. 1.
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`Apple and Valve have engaged in several meet and confers, but Valve has refused to produce
`information responsive to Requests 2 and 32. Valve admits that the information requested exists
`in some undisclosed, readily accessible format, but generically claims it won’t produce the
`information because it is confidential or too burdensome to gather in the manner Apple requested.
`Separately, Valve provided a small production of documents (the “Volume 5 Production”) which
`are so heavily redacted that Apple cannot discern what information they might contain and thus
`are non-responsive and unusable in their current form.1 Apple respectfully requests that the Court
`order Valve to: (1) produce information responsive to Requests 2 and 32; and (2) provide
`unredacted copies of the Volume 5 Production.
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`b. Request 2
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`Apple’s Request 2 is very narrow. It simply requests documents sufficient to show Valve’s: (a)
`total yearly sales of apps and in-app products; (b) annual advertising revenues from Steam; (c)
`annual sales of external products attributable to Steam; (d) annual revenues from Steam; and (e)
`annual earnings (whether gross or net) from Steam. Apple has gone as far as requesting this
`information in any readily accessible format, but Valve refuses to produce it.
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`Request 2 is crucial for calculating the total size of the market for Epic’s available digital
`distribution channels, which this Court already has found highly relevant to this case. See Case
`No. 4:19-cv-03074-YGR-TSH, Dkt. 125 at 14 (stating that one issue Apple must prove is “the
`strength of competition for consumers and app developers” among digital distribution platforms).
`Valve’s Steam undoubtedly is a digital distribution platform that competes to distribute games like
`Fortnite, and its total yearly sales, advertising, and revenue information, uniquely in Valve’s
`possession, are directly relevant to establishing the strength of competition for consumers and app
`developers for Steam.
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`Indeed, recognizing the highly relevant nature of Apple’s Request, this Court previously ordered
`third-party Samsung to produce almost identical information. See Id. at 14 (ordering third-party
`Samsung to produce information relating to “revenue from apps, in-app products, and in-app
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`1 Apple can provide in camera copies of the Volume 5 Production to the Court upon request.
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`Case 4:20-cv-05640-YGR Document 346 Filed 02/18/21 Page 4 of 9
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`advertising”). As this Court recognized with respect to Samsung, this information is “relevant to
`showing the extent of competition” among digital distribution platforms available to distribute
`Fortnite, including the Apple App Store. Id. at 15. Valve recognizes that Apple has argued that
`the relevant market includes video games available through any channel, but did not, at the
`preliminary injunction phase, have the evidence to prove that. That is precisely what Apple is
`trying to prove now and the information requested from Valve is central to that pursuit. See Case
`No. 20-cv-05640-YGR, Dkt. 118 at 17 n.19.
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`Apple has a substantial need for this information as it is uniquely obtainable from Valve. As the
`Court previously held, a party establishes substantial need where information is relevant and not
`reasonably obtainable elsewhere. Apple can only obtain information related to Valve’s app
`revenue, in-app purchases, and advertising from Valve itself. See Case No. 4:19-cv-03074-YGR-
`TSH, Dkt. 125 at 6 (“[S]ubstantial need’ and ‘undue hardship’ requirements met where documents
`were relevant and [party] could not reasonably obtain them elsewhere.”; id. at 21 (“The Court finds
`these documents are relevant, and since Apple is only able to obtain them from either Samsung or
`Google, it has shown a substantial need.”).
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`Valve’s assertion that multiple databases are needed to extract the information Apple requests is a
`distraction. Valve has admitted to Apple’s counsel that the information requested exists in the
`normal course of business, but Valve simply refuses to produce it in any of the formats Apple
`suggested, yet also refuses to provide any information whatsoever as to the form in which the
`information exists and is readily accessible. Nor is Valve’s complaint that the information is
`competitively sensitive a basis for withholding relevant and readily accessible high-level historic
`sales and revenue information.2 Request 2 solely seeks information relating to Valve’s historical
`performance and since “the information sought by this Request does not detail future plans or
`involve strategic assessments . . . there is no substantial risk of competitive or economic harm” to
`Valve. Id. at 17.
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`c. Request 32
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`Request 32 asks for documents sufficient to show: (a) the name of each App on Steam; (b) the date
`range when the App was available on Steam; and (c) the price of the App and any in-app product
`available on Steam. This is basic information relating to the identity and availability of games
`over time on Steam, is necessary to determine the scope and breadth of the digital distribution
`marketplace, and is “relevant to showing competition” between these platforms. Case No. 4:19-
`cv-03074-YGR-TSH, Dkt. 125 at 17.
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`Like the information sought in Request 2, the information sought in Request 32 is historical, and
`does not involve any “future plans or strategic assessments” and thus does not raise risk of any
`competitive harm. Id. at 14. Further, Request 32 seeks information that is uniquely obtainable
`from Valve. Apple has therefore demonstrated substantial need for Request 32, because the
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`2 The Court has already held that the Protective Order in Pepper and Cameron—which is
`substantively identical to the Protective Order in Epic, see (Case No. 20-cv-05640-YGR) (Dkt.
`112)—is “sufficient” to protect the confidentiality of third-party Samsung’s competitively
`sensitive documents. See (Case No. 11-cv-06714-YGR) (Dkt. 242 at 22 n.4). The same result is
`warranted here.
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`information is both relevant and not reasonably obtainable elsewhere. Id.at 6, 21
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`d. Redactions from the Volume 5 Production
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`Valve made its Volume 5 Production with substantial redactions that cover any information that
`looks to be potentially responsive. When asked to provide unredacted copies, Valve stated that
`doing so would be burdensome and intrusive, but did not explain why. There is no apparent burden
`to unredacting these documents; in fact, redacting them in the first place created a greater burden.
`The redacted information, which undoubtedly is responsive given that Valve produced it, appears
`to relate to Apple’s requests for commissions. Further, producing it cannot be unduly burdensome
`given that it already has been produced. This information should be unredacted and, if competitive
`sensitivity is the real issue, then the information is protected by the protective order in this matter.
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`II. Valve’s Position:
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`Valve is a privately held company with approximately 350 employees that develops PC video
`games. Valve does not make or sell phones, tablets, or video games for mobile devices, or
`otherwise compete in the mobile market. Valve also operates Steam, an online platform that lets
`users purchase and play PC games on their laptops and desktops. Steam users cannot buy or use
`mobile apps on Steam. Over 30,000+ PC games are available on Steam, over 99% of which
`were made by third parties other than Valve. Most of these games can also be bought elsewhere,
`including from developers directly, from brick and mortar retail, or on other PC game platforms.
`Third party developers that offer their games on Steam control all pricing and content. Valve
`collects the purchase price from Steam users and remits the proceeds to the third party developer
`net of a revenue share to Valve. Fortnite is not available on Steam, and Epic has publicly and
`unequivocally stated it will not offer Fortnite on Steam unless Valve changes its business model.
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`In response to Apple’s 46 documents requests, Valve already produced documents regarding its
`revenue share, competition with Epic, Steam distribution contracts, and other documents. Apple
`was not satisfied and demands—without offering to cover Valve’s costs, which would be
`significant—that Valve (i) recreate six years’ worth of PC game and item sales for hundreds of
`third party video games, then (ii) produce a massive amount of confidential information about
`these games and Valve’s revenues. Valve objected. See Ex. 2.
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`Apple wrongly claims those requests are narrow. They are not. Apple gave Valve a list of 436
`video games it says are available on the Epic Game Store and Steam, and (a) demanded Valve
`identify, from 2015 to the present, every version and all digital content or items for each of these
`games on Steam, then (b) provide exhaustive information about all of them, including:
` The dates on sale, plus every price and price change, from 2015 to the present (RFP 32);
` Gross revenues for each game version and item, broken down individually (RFP 2); and
` All of Valve’s revenues related to these versions, content and items (RFP 2).
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`A.
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`Apple’s Overbroad Demands Impose Too Heavy A Burden On A Non-Party
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`Apple’s demands would impose an extraordinary burden on Valve to query, process and
`combine a massive amount of to create the documents Apple seeks—materials that Valve does
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`not create or keep in the ordinary course of business—and with little or no value, as Valve does
`not compete in the mobile app market at issue. Specifically, Apple’s demands would require:
`
`Identifying all versions and items on Steam since 2015 for all 436 games on Apple’s list
`would require Valve to review and query years of sales listing data. Apple could use
`public information on Steam to complete this task itself, but wants Valve to do it;
` Determining the sales prices for each game version and item at specific times would
`require Valve to query at least two separate databases—one that stores base prices and
`another that keeps discount information—then merge that data;
` Valve would need to pull unit sales information from a third database and payment rules
`from yet another database, then collate that information as well;
` For any game or item sold as part of a package (as many are), Valve would need to query
`yet another source for the allocation rules used to allocate that specific package price
`among its components, then apply those rules to other queried data;
` Return information must also be queried and the compiled data adjusted for returns; then
` Valve would need to query and separate out revenue share information to determine its
`revenues related to each sale.
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`That is an overwhelming amount of work—and it is for only a single version or item. Apple’s
`demands would require Valve to repeat this process thousands of times. The fact that underlying
`data exists somewhere spread across multiple databases, which each could conceivably be
`queried to identify one data point, then all data points from each database processed, compiled,
`error tested and aggregated to create from scratch a data report that is never created or kept in the
`ordinary course of business does not mean the information sought is “reasonably accessible,” as
`Apple wrongly asserts. Similarly, that Apple narrowed its requests from all 30,000+ games on
`Steam over ten years, to 436 games over six years does not eliminate the burden or make the
`requests reasonable—it simply makes an impossible task slightly less impossible.
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`Apple argues it is fair to make Valve do all this work and incur this disruption because
`Samsung—a public company that competes in the mobile app market—produced something
`similar. Public companies like Samsung must keep detailed financial and operational
`information. Valve is a privately held company with no outside shareholders or lenders, and not
`subject to public regulatory reporting and auditing requirements. Valve does not in the ordinary
`course of business keep the information Apple seeks for a simple reason: Valve doesn’t need it.
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`Apple’s RFPs 2 and 32 seek proprietary and highly confidential information, so Apple must
`establish substantial need for the information that cannot be otherwise met without undue
`hardship. Fed. R. Civ. P. 45(d)(3). Apple has not made that showing.
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`First, Apple argues the information it demands is necessary to calculate market size and
`definition. False. Apple, Google and Samsung compete with each other in the mobile app
`market. Valve does not compete in that market. The Court already recognized the relevant
`market must include the product at issue. (Case No. 20-cv-05640-YGR) (Dkt. 118 at 12)
`(citation omitted). Apple argues the relevant market could be so broad as to include any video
`game available through any channel, but gives no evidence this might actually be true. Indeed,
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`Apple Has Not Shown Substantial Need For The Information It Demands.
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`B.
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`the Court noted there is “little evidence” iOS users owned multiple devices and changed from
`one to another in response to price changes. Id. at 17 n.19.
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`Second, Apple’s latest market definition argument is contradicted by its prior ones. When
`opposing a preliminary injunction, Apple argued the relevant market included “competing
`platforms on which Fortnite is distributed and monetized.” (Case No. 20-cv-05640-YGR) (Dkt.
`118 at 16). Later, in seeking to compel Samsung, this Court noted that “Apple firmly takes the
`view that in the Epic case, the relevant market is Epic alone.” Id. (Dkt. 296 at 4). Valve is not in
`either of these markets—Valve is not Epic, and Fortnite is not available on Steam.
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`Third, Apple argues Valve’s sales information might help define the relevant market, yet Apple
`seeks information only about a subset of games sold on both Steam and the Epic Games Store.
`This does not show market size or definition —it just shows which of two market participants
`sell more copies of particular PC games. This Court rejected Apple’s similar attempt to compel
`Epic sales information from Samsung, holding that documents focused on Epic are “unlikely to
`be important evidence of competition in a market or the effect of Apple’s policies on any sort of
`market” and that “if the market is any bigger than this one company, the relevant discovery
`would have to be about the general availability of other ways to distribute apps . . . and in general
`what kinds of commission structures or policies apply.” Id. (Dkt. 296 at 4-5). Valve already
`produced information to Apple about Valve’s revenue share, and other ways to distribute mobile
`apps and games are readily knowable to Apple and its economists without discovery from Valve.
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`Apple claims the information it demands is uniquely obtainable from Valve, yet much of what
`Apple seeks is sales and pricing information for third party games. That information belongs to
`the third party developers of those games, not Valve. But instead of seeking it from those
`developers—and being required to establish substantial need to obtain their information—Apple
`takes a shortcut by subpoenaing Valve. See U.S. v. Dentsply Int’l, Inc., 187 F.R.D. 152, 160 (D.
`Del. 1999) (noting “[t]he risk of injury to the owner of confidential information is presumably
`greater where the owner was never in a position to accept or reject the risk of disclosure of
`confidential information”). Valve properly declined to provide third parties’ confidential
`information (sales and pricing data) to Apple and redacted it from its Volume 5 production.
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`That Valve’s own highly confidential sales and revenue information is available only from Valve
`is not a substitute for showing relevant and a substantial need. Valve has chosen to stay private
`in part to avoid the burden of the public company disclosure and reporting requirements that
`companies like Samsung or Google are subject to. Valve does not disclose its sales and revenue
`information and projections, and Valve derives a significant value and edge from the
`confidentiality of such information, including by keeping it out of the hands of companies like
`Epic who also sell PC games. Accordingly, Valve redacted such information from its Volume 5
`production and declined to produce it in response to Apple’s demands.
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`Somehow, in a dispute over mobile apps, a maker of PC games that does not compete in the
`mobile market or sell “apps” is being portrayed as a key figure. It’s not. The extensive and
`highly confidential information Apple demands about a subset of the PC games available on
`Steam does not show the size or parameters of the relevant market and would be massively
`burdensome to pull together. Apple’s demands for further production should be rejected.
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`Case 4:20-cv-05640-YGR Document 346 Filed 02/18/21 Page 8 of 9
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`/s/ Michelle Lowery
`Michelle Lowery
`Attorneys for Defendant Apple Inc.
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`February 18, 2021
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`McDERMOTT WILL & EMERY LLP
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`DATED:
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`By:
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`McDERMOTT WILL & EMERY LLP
`MICHELLE LOWERY
`mslowery@mwe.com
`2049 Century Park East, Suite 3200
`Los Angeles, CA 90067-3206
`Telephone: +1 310 277 4110
`Facsimile: +1 310 277 4730
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`PETER JOHN SACRIPANTI
`psacripanti@mwe.com
`JOHN J. CALANDRA
`jcalandra@mwe.com
`NICOLE L. CASTLE
`ncastle@mwe.com
`340 Madison Avenue
`New York, NY 10173-1922
`Telephone: +1 212 547 5400
`Facsimile: +1 212 547 5444
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`FOX ROTHSCHILD LLP
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`DATED:
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`By:
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`February 18, 2021
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`/s/ Gavin Skok
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`Gavin Skok (pro hac vice to be
`submitted)
`Jaemin Chang
`Attorneys for Non-Party
`Valve Corporation
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`FOX ROTHSCHILD LLP
`GAVIN W. SKOK
`gskok@foxrothschild.com
`1001 Fourth Ave., Suite 4500
`Seattle, WA 98154-1065
`Telephone: +1 206 624 3600
`Facsimile: +1 206 389 1708
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`JAEMIN CHANG
`jchang@foxrothschild.com
`345 California St., Suite 2200
`San Francisco, CA 94104-2670
`Telephone: +1 415 364 5540
`Facsimile: +1 415 391 4436
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`Case 4:20-cv-05640-YGR Document 346 Filed 02/18/21 Page 9 of 9
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`E-FILING ATTESTATION
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`I, Michelle Lowery, am the ECF User whose ID and password are being used to file this
`document. In compliance with Civil Local Rule 5-1(i)(3), I hereby attest that each of the
`signatories identified above has concurred in this filing.
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`By:
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`/s/ Michelle Lowery
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`Michelle Lowery
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