Case: 21-16506, 05/25/2022, ID: 12455934, DktEntry: 163, Page 1 of 136
`
`Nos. 21-16506 & 21-16695
`
`
`
`United States Court of Appeals for the Ninth Circuit
`
`
`EPIC GAMES, INC.,
`Plaintiff, Counter-defendant – Appellant, Cross-Appellee,
`
`
`v.
`
`
`
`APPLE INC.,
`Defendant, Counterclaimant – Appellee, Cross-Appellant.
`_____________________________
`
`
`Appeal from the U.S. District Court
`for the Northern District of California
`The Honorable Yvonne Gonzalez Rogers (No. 4:20-cv-05640-YGR-TSH)
`_____________________________
`
`REPLY BRIEF ON APPEAL AND
`RESPONSE BRIEF ON CROSS-APPEAL OF
`APPELLANT, CROSS-APPELLEE EPIC GAMES, INC.
`_____________________________
`
`
`Christine A. Varney
`Katherine B. Forrest
`Gary A. Bornstein
`Antony L. Ryan
`Yonatan Even
`Omid H. Nasab
`CRAVATH, SWAINE & MOORE LLP
`825 Eighth Avenue
`New York, NY 10019-7475
`(212) 474-1000
`
`
`Paul J. Riehle
`FAEGRE DRINKER BIDDLE & REATH
`LLP
`Four Embarcadero Center
`San Francisco, CA 94111-4180
`(415) 591-7500
`
`Thomas C. Goldstein
`GOLDSTEIN & RUSSELL, P.C.
`7475 Wisconsin Avenue, Suite 850
`Bethesda, MD 20814-6902
`(202) 362-0636
`
`
`Counsel for Appellant, Cross-Appellee Epic Games, Inc.
`
`
`
`
`
`
`
`

`

`Case: 21-16506, 05/25/2022, ID: 12455934, DktEntry: 163, Page 2 of 136
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`
`
`TABLE OF CONTENTS
`
`TABLE OF AUTHORITIES ........................................................................ v
`
`STATUTORY PROVISIONS ................................................................... xvii
`
`INTRODUCTION ........................................................................................ 1
`
`SUMMARY OF ARGUMENT ..................................................................... 5
`
`ARGUMENT ON EPIC’S APPEAL ............................................................ 8
`
`I.
`
`THE DISTRICT COURT ERRED IN REJECTING EPIC’S
`SECTION 1 CLAIMS. ........................................................................ 8
`
`A. Epic Proved Its Section 1 Claims Under the District
`Court’s Market. ......................................................................... 8
`
`B. Epic Has Challenged a Contract in Restraint of Trade. ...... 10
`
`1.
`
`2.
`
`3.
`
`Apple’s Contractual Restraints Are Not
`Unilateral Conduct. ....................................................... 12
`
`IP Agreements Are Not Carved Out of Section 1. ....... 14
`
`The Challenged Contractual Restraints Are Not
`“Technical Requirements” of iOS. ................................ 18
`
`C. Apple’s Restrictions Do Not Survive Rule of Reason
`Scrutiny.................................................................................... 22
`
`1.
`
`2.
`
`3.
`
`4.
`
`The District Court Found Substantial
`Anticompetitive Effects. ................................................ 22
`
`The District Court Used the Wrong Legal
`Framework To Evaluate Apple’s Procompetitive
`Justifications. ................................................................. 31
`
`The District Court’s Findings Establish Less
`Restrictive Alternatives. ............................................... 38
`
`The District Court’s Failure To Balance Was
`Error. .............................................................................. 47
`
`
`
`ii
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`
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`II. THE DISTRICT COURT ERRED IN REJECTING EPIC’S
`SECTION 2 CLAIMS. ...................................................................... 57
`
`A.
`
`B.
`
`The District Court Erred in Rejecting Epic’s
`Foremarket. ............................................................................. 57
`
`The District Court Erred in Rejecting Epic’s
`Aftermarkets. .......................................................................... 61
`
`1.
`
`2.
`
`The District Court and Apple Use the Wrong
`Framework for Aftermarket Lock-In. .......................... 62
`
`Direct Evidence of Apple’s Monopoly Power
`Confirms Epic’s Aftermarkets. ..................................... 65
`
`C. Epic Correctly Analyzed the Markets Under Amex.............. 71
`
`D. Epic’s Aftermarkets Should Not Be Limited to Game
`Transactions. ........................................................................... 75
`
`E. Apple’s Restrictions Do Not Survive Rule of Reason
`Scrutiny.................................................................................... 77
`
`III. THE DISTRICT COURT ERRED IN REJECTING EPIC’S
`TYING CLAIM. ................................................................................ 79
`
`IV. THE CONTRACTUAL RESTRICTIONS AT ISSUE ARE
`UNLAWFUL, VOID AS AGAINST PUBLIC POLICY, AND
`UNCONSCIONABLE. ..................................................................... 83
`
`ARGUMENT ON APPLE’S CROSS-APPEAL ......................................... 85
`
`I.
`
`APPLE’S POST-JUDGMENT CONDUCT DOES NOT
`MOOT EPIC’S CLAIM. .................................................................... 87
`
`II. EPIC’S UCL CLAIM IS NOT FORECLOSED AS A MATTER
`OF LAW. ........................................................................................... 91
`
`A.
`
`“Unfair” Conduct Need Not Be “Unlawful.” .......................... 92
`
`
`
`iii
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`

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`
`
`B.
`
`The District Court Correctly Applied Both the
`Competitor Tethering and Consumer Balancing Tests
`To Find Apple Violated the UCL. .......................................... 96
`
`1.
`
`2.
`
`Epic Satisfied Cel-Tech’s Competitor Test. .................. 98
`
`Epic Satisfied the Consumer Balancing Test. ........... 100
`
`C. Comprehensive Market Definition Analysis Is Not
`Required for UCL Unfairness Claims. ................................ 101
`
`D. Amex Has No Bearing on UCL Claims or Apple’s Anti-
`Steering Restraints. .............................................................. 104
`
`III. THE UCL INJUNCTION WAS WITHIN THE DISTRICT
`COURT’S AUTHORITY. ................................................................ 106
`
`A.
`
`B.
`
`The District Court Properly Exercised Its Authority
`Under California Law. .......................................................... 106
`
`The District Court Properly Exercised Its Authority
`Under Federal Law. .............................................................. 109
`
`IV. THE DISTRICT COURT CORRECTLY INTERPRETED
`APPLE’S INDEMNIFICATION CLAUSE. .................................. 113
`
`CONCLUSION ......................................................................................... 116
`
`
`
`
`
`iv
`
`

`

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`
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`Page(s)
`
`Alki Partners, LP v. DB Fund Servs., LLC,
`4 Cal. App. 5th 574 (2016) .................................................. 113, 114, 115
`
`Allen-Myland, Inc. v. IBM Corp.,
`33 F.3d 194 (3d Cir. 1994) .................................................................... 10
`
`Allied Orthopedic Appliances Inc. v. Tyco Health Care Grp.,
`592 F.3d 991 (9th Cir. 2010) ................................................................. 54
`
`Am. States Ins. Co. v. Dastar Corp.,
`318 F.3d 881 (9th Cir. 2003) ................................................................. 89
`
`Am. Needle, Inc. v. NFL,
`560 U.S. 183 (2010) ............................................................................... 13
`
`Ariz. Dream Act Coal. v. Brewer,
`855 F.3d 957 (9th Cir. 2017) ............................................................... 112
`
`Aspen Skiing Co. v. Aspen Highlands Skiing Corp.,
`472 U.S. 585 (1985) ............................................................................... 17
`
`Avaya Inc., RP v. Telecom Labs, Inc.,
`838 F.3d 354 (3d Cir. 2016) ............................................................ 62, 63
`
`Barquis v. Merchs. Collection Ass’n,
`7 Cal. 3d 94 (1972) ................................................................................ 93
`
`Beaver v. Tarsadia Hotels,
`816 F.3d 1170 (9th Cir. 2016) ............................................................... 93
`
`Berkey Photo, Inc. v. Eastman Kodak Co.,
`603 F.2d 263 (2d Cir. 1979) .................................................................. 36
`
`Bresgal v. Brock,
`843 F.2d 1163 (9th Cir. 1987) ............................................. 108, 110, 111
`
`
`
`v
`
`

`

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`
`
`Brooke Grp. v. Brown & Williamson Tobacco Corp.,
`509 U.S. 209 (1993) ............................................................................... 26
`
`Cal. Dental Ass’n v. FTC,
`224 F.3d 942 (9th Cir. 2000) ............................................................... 104
`
`Cap. Imaging Assocs., P.C. v. Mohawk Valley Med. Assocs., Inc.,
`996 F.2d 537 (2d Cir. 1993) .................................................................. 51
`
`Cel-Tech Commc’ns, Inc. v. L.A. Cellular Tel. Co.,
`20 Cal. 4th 163 (1999) ................................................................... passim
`
`Chavez v. Whirlpool Corp.,
`93 Cal. App. 4th 363 (2001) ............................................................ 94, 95
`
`Chi. Bd. of Trade v. United States,
`246 U.S. 231 (1918) ............................................................................... 50
`
`City of Colton v. Am. Promotional Events, Inc.,
`614 F.3d 998 (9th Cir. 2010) ................................................................. 88
`
`City of San Jose v. Off. of the Comm’r of Baseball,
`776 F.3d 686 (9th Cir. 2015) ........................................................... 94, 95
`
`Consumers Union of U.S., Inc. v. Alta-Dena Certified Dairy,
`4 Cal. App. 4th 963 (1992) .................................................................. 106
`
`Cont’l Auto. Sys., Inc. v. Avanci, LLC,
`27 F.4th 326 (5th Cir. 2022) ........................................................... 90, 91
`
`Cont’l T.V., Inc. v. GTE Sylvania, Inc.
`433 U.S. 36 (1977) ................................................................................. 50
`
`Convergent Mobile, Inc. v. JTH Tax, Inc.,
`No. 4:19-cv-06484-YGR, 2021 WL 1580830
`(N.D. Cal. Apr. 22, 2021) .................................................................... 115
`
`Copperweld Corp. v. Indep. Tube Corp.,
`467 U.S. 752 (1984) ......................................................................... 13, 21
`
`Ctr. for Biological Diversity v. Exp.-Imp. Bank of the U.S.,
`894 F.3d 1005 (9th Cir. 2018) ............................................................... 88
`
`
`
`vi
`
`

`

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`
`
`
`Dickson, Carlson & Campillo v. Pole,
`83 Cal. App. 4th 436 (2000) ................................................................ 113
`
`Digidyne Corp. v. Data Gen. Corp.,
`734 F.2d 1336 (9th Cir. 1984) ......................................................... 44, 61
`
`Diva Limousine, Ltd. v. Uber Techs., Inc.,
`392 F. Supp. 3d 1074 (N.D. Cal. 2019) ...................................... 102, 103
`
`Dream Theater, Inc. v. Dream Theater,
`124 Cal. App. 4th 547 (2004) .............................................................. 115
`
`Drum v. San Fernando Valley Bar Ass’n,
`182 Cal. App. 4th 247 (2010) ........................................................ 94, 100
`
`Eastman Kodak Co. v. Image Tech. Servs., Inc.,
`504 U.S. 451 (1992) ....................................................................... passim
`
`Easyriders Freedom F.I.G.H.T. v. Hannigan,
`92 F.3d 1486 (9th Cir. 1996) ............................................................... 110
`
`Ehret v. Uber Techs., Inc.,
`68 F. Supp. 3d 1121 (N.D. Cal. 2014) ................................................ 112
`
`Eiess v. USAA Fed. Sav. Bank,
`404 F. Supp. 3d 1240 (N.D. Cal. 2019) .............................................. 107
`
`Facebook, Inc. v. BrandTotal Ltd.,
`No. 20-cv-07182-JCS, 2021 WL 2354751
`(N.D. Cal. June 9, 2021)...................................................................... 103
`
`Facebook, Inc. v. BrandTotal Ltd.,
`No. 20-cv-07182-JCS, 2021 WL 3885981
`(N.D. Cal. Aug. 31, 2021) .................................................................... 103
`
`Franchise Tax Bd. v. Alcan Aluminum Ltd.,
`493 U.S. 331 (1990) ............................................................................... 90
`
`Freeman v. San Diego Ass’n of Realtors,
`322 F.3d 1133 (9th Cir. 2003) ............................................. 14, 24, 33, 36
`
`
`
`vii
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`
`
`Freitag v. Ayers,
`468 F.3d 528 (9th Cir. 2006) ................................................................. 89
`
`FTC v. Actavis, Inc.,
`570 U.S. 136 (2013) ......................................................................... 15, 68
`
`FTC v. Qualcomm Inc.,
`969 F.3d 974 (9th Cir. 2020) ......................................................... passim
`
`Garot Anderson Mktg., Inc. v. Blue Cross & Blue Shield
`United of Wisc.,
`772 F. Supp. 1054 (N.D. Ill. 1990) ....................................................... 21
`
`Gerawan Farming, Inc. v. Rehrig Pac. Co.,
`No. 1:11-cv-1273-LJO-BAM, 2013 WL 1934173
`(E.D. Cal. May 9, 2013) ......................................................................... 98
`
`Glob. Disc. Travel Servs., LLC v. Trans World Airlines, Inc.,
`960 F. Supp. 701 (S.D.N.Y. 1997) ........................................................ 65
`
`Gough v. Rossmoor Corp.,
`585 F.2d 381 (9th Cir. 1978) ................................................................. 50
`
`Greenley v. Avis Budget Grp.,
`No. 19-cv-00421-GPC-AHG, 2020 WL 1493618
`(S.D. Cal. Mar. 27, 2020) .................................................................... 108
`
`Greyhound Comput. Corp. v. IBM Corp.,
`559 F.2d 488 (9th Cir. 1977) ................................................................. 28
`
`Hansberry v. Lee,
`311 U.S. 32 (1940) ............................................................................... 111
`
`Herbert v. Lando,
`441 U.S. 153 (1979) ............................................................................... 53
`
`Hicks v. PGA Tour, Inc.,
`897 F.3d 1109 (9th Cir. 2018) ............................................................... 76
`
`High Sierra Hikers Ass’n v. Blackwell,
`390 F.3d 630 (9th Cir. 2004) ............................................................... 109
`
`
`
`viii
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`
`
`hiQ Labs, Inc. v. LinkedIn Corp.,
`273 F. Supp. 3d 1099 (N.D. Cal. 2017) .............................................. 102
`
`Hodges v. Comcast Cable Commc’ns, LLC,
`21 F.4th 535 (9th Cir. 2021) ............................................................... 109
`
`Ill. Bell Tel. Co. v. FCC,
`740 F.2d 465 (7th Cir. 1984) ................................................................. 70
`
`Image Tech. Servs., Inc. v. Eastman Kodak Co.,
`125 F.3d 1195 (9th Cir. 1997) ......................................................... 14, 17
`
`Image Tech. Servs., Inc. v. Eastman Kodak Co.,
`903 F.2d 612 (9th Cir. 1990) ................................................................. 44
`
`Impax Labs., Inc. v. FTC,
`994 F.3d 484 (5th Cir. 2021) ........................................................... 41, 44
`
`In re Ambac Bond Ins. Cases,
`No. A139765, 2016 WL 661903
`(Cal. Ct. App. Feb. 18, 2016) ................................................................ 95
`
`In re Cipro Cases I & II,
`61 Cal. 4th 116 (2015) ........................................................................... 96
`
`In re Cardizem CD Antitrust Litig.,
`332 F.3d 896 (6th Cir. 2003) ................................................................. 21
`
`In re McLinn,
`744 F.2d 677 (9th Cir. 1984) ................................................................. 91
`
`In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig.,
`375 F. Supp. 3d 1058 (N.D. Cal. 2019),
`aff’d, 958 F.3d 1239 (9th Cir. 2020),
`aff’d sub nom. NCAA v. Alston, 141 S. Ct. 2141 (2021) .......... 43, 51, 52
`
`In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig.,
`958 F.3d 1239 (9th Cir. 2020),
`aff’d sub nom. NCAA v. Alston, 141 S. Ct. 2141 (2021) ...................... 34
`
`
`
`ix
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`
`
`Interstate Cir. v. United States,
`306 U.S. 208 (1939) ............................................................................... 15
`
`Jack Russell Terrier Network of N. Cal. v. Am. Kennel Club, Inc.,
`407 F.3d 1027 (9th Cir. 2005) ............................................................... 13
`
`Jefferson Parish Hosp. Dist. No. 2 v. Hyde,
`466 U.S. 2 (1984), abrogated on other grounds by Ill. Tool
`Works Inc. v. Indep. Ink, Inc., 547 U.S. 28 (2006)................... 79, 80, 82
`
`Kilgore v. KeyBank, N.A.,
`718 F.3d 1052 (9th Cir. 2013) ............................................................. 106
`
`Klein v. Facebook, Inc.,
`No. 20-cv-08570-LHK, __ F. Supp. 3d __, 2022 WL 141561
`(N.D. Cal. Jan. 14, 2022) ...................................................................... 60
`
`Korea Supply Co. v. Lockheed Martin Corp.,
`29 Cal. 4th 1134 (2003) ......................................................................... 94
`
`L.A. Mem’l Coliseum Comm’n v. NFL,
`726 F.2d 1381 (9th Cir. 1984) ......................................................... 10, 35
`
`Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,
`551 U.S. 877 (2007) ............................................................................... 34
`
`Linton v. Cnty. of Contra Costa,
`31 Cal. App. 5th 628 (2019) ................................................................ 114
`
`LiveUniverse, Inc. v. MySpace, Inc.,
`2007 WL 6865852 (C.D. Cal. June 4, 2007),
`aff’d, 304 F. App’x 554 (9th Cir. 2008) ................................................. 60
`
`LiveUniverse, Inc. v. MySpace, Inc.,
`304 F. App’x 554 (9th Cir. 2008) .......................................................... 95
`
`Loeffler v. Target Corp.,
`58 Cal. 4th 1081 (2014) ......................................................................... 94
`
`Lozano v. AT&T Wireless Servs., Inc.,
`504 F.3d 718 (9th Cir. 2007) ................................................................. 97
`
`
`
`x
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`
`
`MacDermid Printing Sols. LLC v. Cortron Corp.,
`833 F.3d 172 (2d Cir. 2016) ............................................................ 26, 71
`
`Maldonado v. Morales,
`556 F.3d 1037 (9th Cir. 2009) ............................................................... 11
`
`McGill v. Citibank, N.A.,
`2 Cal. 5th 945 (2017) ................................................................... 107, 108
`
`Metricolor LLC v. L’Oréal S.A.,
`No. 2:18-cv-00364-CAS, 2020 WL 3802942
`(C.D. Cal. July 7, 2020) ....................................................................... 102
`
`Motion Picture Pats. Co. v. Universal Film Mfg. Co.,
`243 U.S. 502 (1917) ............................................................................... 17
`
`Multistate Legal Stud., Inc. v. Harcourt Brace Jovanovich
`Legal & Pro. Publ’ns, Inc.,
`63 F.3d 1540 (10th Cir. 1995) ............................................................... 59
`
`N. Pac. Ry. Co. v. United States,
`356 U.S. 1 (1958) ................................................................................... 83
`
`Nat’l Soc’y of Pro. Eng’rs v. United States,
`435 U.S. 679 (1978) ......................................................................... 32, 33
`
`Nationwide Biweekly Admin., Inc. v. Super. Ct.
`of Alameda Cnty.,
`9 Cal. 5th 279 (2020) ..................................................................... passim
`
`NCAA v. Alston,
`141 S. Ct. 2141 (2021) ................................................................... passim
`
`NCAA v. Bd. of Regents of Univ. of Okla.,
`468 U.S. 85 (1984) ................................................................................. 26
`
`Newcal Indus., Inc. v. IKON Off. Sol.,
`513 F.3d 1038 (9th Cir. 2008) ......................................................... 58, 64
`
`
`
`xi
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`
`
`Nobody in Particular Presents, Inc. v. Clear Channel
`Commc’ns, Inc.,
`311 F. Supp. 2d 1048 (D. Colo. 2004) ................................................... 70
`
`Norcia v. Samsung Telecomms. Am., LLC,
`845 F.3d 1279 (9th Cir. 2017) ............................................................... 97
`
`Nw. Wholesale Stationers, Inc. v. Pac. Stationery & Printing Co.,
`472 U.S. 284 (1985) ............................................................................... 12
`
`O’Bannon v. NCAA,
`802 F.3d 1049 (9th Cir. 2015) ......................................................... 29, 44
`
`Ohio v. Am. Express Co.,
`138 S. Ct. 2274 (2018) ................................................................... passim
`
`Oliver v. SD-3C LLC,
`751 F.3d 1081 (9th Cir. 2014) ............................................................... 12
`
`Optronic Techs., Inc. v. Ningbo Sunny Elec. Co.,
`20 F.4th 466 (9th Cir. 2021) ............................................................... 110
`
`Paladin Assocs., Inc. v. Mont. Power Co.,
`328 F.3d 1145 (9th Cir. 2003) ............................................................... 12
`
`People’s Choice Wireless, Inc. v. Verizon Wireless,
`131 Cal. App. 4th 656 (2005) ...................................................... 103, 104
`
`Perma Life Mufflers, Inc. v. Int’l Parts Corp.,
`392 U.S. 134 (1968), overruled on other grounds by
`Copperweld Corp. v. Indep. Tube Corp.,
`467 U.S. 752 (1984) ............................................................................... 13
`
`PLS.com, LLC v. Nat’l Ass’n of Realtors,
`32 F.4th 824 (9th Cir. 2022) ......................................................... passim
`
`Progressive W. Ins. v. Yolo Cnty. Super. Ct.,
`135 Cal. App. 4th 263 (2005) .............................................................. 101
`
`PSI Repair Servs., Inc. v. Honeywell, Inc.,
`104 F.3d 811 (6th Cir. 1997) ................................................................. 63
`
`
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`
`
`Re/Max Int’l, Inc. v. Realty One, Inc.,
`173 F.3d 995 (6th Cir. 1999) ................................................................. 70
`
`Red Lion Med. Safety, Inc. v. Ohmeda, Inc.,
`63 F. Supp. 2d 1218 (E.D. Cal. 1999) ................................................... 63
`
`Rick-Mik Enters., Inc. v. Equilon Enters., LLC,
`532 F.3d 963 (9th Cir. 2008) ........................................................... 80, 81
`
`Rothery Storage & Van Co. v. Atlas Van Lines, Inc.,
`792 F.2d 210 (D.C. Cir. 1986) ............................................................... 54
`
`Rubio v. Cap. One Bank,
`613 F.3d 1195 (9th Cir. 2010) ............................................................... 94
`
`S. Or. Barter Fair v. Jackson Cnty.,
`372 F.3d 1128 (9th Cir. 2004) ............................................................... 88
`
`SmileDirectClub, LLC v. Tippins,
`31 F.4th 1110 (9th Cir. 2022) ............................................................... 50
`
`Smith v. Pro Football, Inc.,
`593 F.2d 1173 (D.C. Cir. 1978) ............................................................. 34
`
`Snapkeys, Ltd. v. Google LLC,
`No. 19-cv-02658-LHK, 2020 WL 6381354
`(N.D. Cal. Oct. 30, 2020) ..................................................................... 103
`
`Standard Oil Co. v. United States,
`221 U.S. 1 (1911) ................................................................................... 50
`
`Stuhlbarg Int’l Sales Co. v. John D. Brush & Co.,
`240 F.3d 832 (9th Cir. 2001) ............................................................... 111
`
`Sullivan v. NFL,
`34 F.3d 1091 (1st Cir. 1994) ........................................................... 34, 53
`
`Surgical Instrument Serv. Co. v. Intuitive Surgical, Inc.,
`__ F. Supp. 3d __, No. 21-cv-03496-VC, 2021 WL 5474898
`(N.D. Cal. Nov. 23, 2021) ...................................................................... 81
`
`
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`
`
`Ticconi v. Blue Shield of Cal. Life & Health Ins. Co.,
`160 Cal. App. 4th 528 (2008) ...................................................... 112, 113
`
`The Frances,
`12 U.S. (8 Cranch) 354 (1814) .............................................................. 12
`
`Times-Picayune Publ’g Co. v. United States,
`345 U.S. 594 (1953) ............................................................................... 65
`
`Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp.,
`959 F.2d 468 (3d Cir. 1992) (en banc) .................................................. 59
`
`U.S. Parole Comm’n v. Geraghty,
`445 U.S. 388 (1980) ............................................................................... 88
`
`United States v. Apple, Inc.,
`791 F.3d 290, 335 (2d Cir. 2015) .......................................................... 36
`
`United States v. AMR Corp.,
`335 F.3d 1109 (10th Cir. 2003) ............................................................. 71
`
`United States v. Colgate & Co.,
`250 U.S. 300 (1919) ............................................................................... 95
`
`United States v. Cont’l Can Co.,
`378 U.S. 441 (1964) ............................................................................... 10
`
`United States v. Gen. Motors Corp.,
`384 U.S. 127 (1966) ............................................................................... 79
`
`United States v. Grinnell Corp.,
`384 U.S. 563 (1966) ............................................................................... 66
`
`United States v. Microsoft Corp.,
`253 F.3d 34 (D.C. Cir. 2001) (en banc) ........................................ passim
`
`United States v. Obaid,
`971 F.3d 1095 (9th Cir. 2020) ............................................................... 51
`
`United States v. Parke, Davis & Co.,
`362 U.S. 29 (1960) ................................................................................. 11
`
`
`
`xiv
`
`

`

`Case: 21-16506, 05/25/2022, ID: 12455934, DktEntry: 163, Page 15 of 136
`
`
`
`United States v. Rockford Mem’l Corp.,
`898 F.2d 1278 (7th Cir. 1990) ............................................................... 10
`
`United States v. Topco Assocs., Inc.,
`405 U.S. 596 (1972) ............................................................................... 34
`
`United States v. Visa U.S.A. Inc.,
`163 F. Supp. 2d 322 (S.D.N.Y. 2001),
`aff’d, 344 F.3d 229 (2d Cir. 2003) ......................................................... 70
`
`United States v. Westinghouse Elec. Corp.,
`648 F.2d 642 (9th Cir. 1981) ................................................................. 14
`
`Wilbur v. Locke,
`423 F.3d 1101 (9th Cir. 2005), abrogated on other grounds
`by Levin v. Com. Energy, Inc., 560 U.S. 413 (2010) ............................ 87
`
`Worldwide Travel, Inc. v. Travelmate US, Inc.,
`No. 14-cv-00155-BAS-DHB, 2015 WL 1013704
`(S.D. Cal. Mar. 9, 2015) ........................................................................ 98
`
`Zalkind v. Ceradyne, Inc.,
`194 Cal. App. 4th 1010 (2011) ............................................................ 115
`
`Zenith Radio Corp. v. Hazeltine Rsch., Inc.,
`395 U.S. 100 (1969) ............................................................................... 15
`
`Statutes
`
`15 U.S.C. § 1 ....................................................................................... passim
`
`15 U.S.C. § 2 ....................................................................................... passim
`
`Cal. Bus. & Prof. Code § 17200 ........................................................... 86, 93
`
`Cal. Bus. & Prof. Code § 17203 ......................................................... 93, 106
`
`Other Authorities
`
`Dep’t of Just. & Fed. Trade Comm’n,
`Antitrust Guidelines for the Licensing of Intellectual
`Property (2017) ...................................................................................... 17
`
`
`
`xv
`
`

`

`Case: 21-16506, 05/25/2022, ID: 12455934, DktEntry: 163, Page 16 of 136
`
`
`
`David S. Evans & Richard Schmalensee,
`Matchmakers: The New Economics of Multisided
`Platforms (2016) .................................................................................... 73
`
`Herbert Hovenkamp,
`The NCAA and the Rule of Reason,
`52 Rev. Indus. Org. 323 (2016) ............................................................. 52
`
`Julian O. von Kalinowski,
`Antitrust Laws and Trade Regulation § 12.02
`(2d ed. 2017) .......................................................................................... 51
`
`Phillip E. Areeda & Herbert Hovenkamp,
`Antitrust Law: An Analysis of Antitrust Principles and
`Their Application (5th ed. 2020) ........................................ 29, 41, 51, 52
`
`
`
`
`
`
`
`xvi
`
`

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`
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`STATUTORY PROVISIONS
`
`The pertinent statutes are set forth verbatim in the addenda to the
`
`Opening Brief of Epic Games, Inc. (“Epic”) and the Principal and
`
`Response Brief of Apple Inc. (“Apple”).
`
`
`
`xvii
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`

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`
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`INTRODUCTION
`
`Through its restraints on the distribution of iPhone apps and in-app
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`purchases of digital content, Apple controls the relationship between
`
`more than a billion consumers and millions of app developers. The
`
`district court made extensive factual findings regarding the substantial
`
`anticompetitive effects of these restraints: increased prices, reduced
`
`innovation, reduced quality, and foreclosed competition. Epic’s opening
`
`brief explained why these findings cannot be squared with the court’s
`
`legal conclusion that Apple’s conduct comports with the Sherman Act.
`
`Unable to defend this fundamental inconsistency, Apple waves away the
`
`findings as “out-of-context” and seeks cover behind the “clear error”
`
`standard of review for factual findings. This is a red herring: as Epic
`
`made clear in its opening brief, while it does not agree with all of the
`
`district court’s factual findings, Epic’s appeal raises only questions of law.
`
`These legal questions include whether contracts of adhesion are
`
`subject to Section 1; whether conduct regarding products that are not
`
`separately licensed or sold is subject to scrutiny under the antitrust laws;
`
`whether single-brand markets are appropriate where consumers are
`
`locked in by their purchase of an initial product; whether a tying claim
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`1
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`
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`may be brought against technologically integrated products that have
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`separate demand; and whether balancing anticompetitive effects against
`
`procompetitive benefits is necessary.
`
`The district court, led astray on many points by Apple, reached the
`
`wrong answer to all of these questions, and Epic, along with the United
`
`States, the Attorneys General of 34 States and the District of Columbia,
`
`leading antitrust scholars, and other amici curiae, explained the multiple
`
`legal errors plaguing the decision below. But Apple barely engages with
`
`any of these legal issues in its response, instead employing diversion.
`
`Apple claims the challenged restraints are merely the result of
`
`technical design decisions necessary for the iPhone to function. But the
`
`restraints are contractually imposed and enforced—and the district
`
`court’s findings, buttressed by the record, demonstrate that technical
`
`design was in service of Apple’s policy choices, not the other way around.
`
`Apple also asserts that the relief Epic seeks will compromise the
`
`security of the iPhone. But that is untrue. The operating system Apple
`
`uses in its Mac computers (“macOS”) does not include the challenged
`
`restraints found in the iPhone operating system (“iOS”), and Apple
`
`publicly touts the Mac’s security. Apple also permits multiple alternative
`
`
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`2
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`

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`
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`payment solutions in the App Store for apps selling physical goods,
`
`confirming that the requirement to use Apple’s in-app payment solution,
`
`IAP, for digital goods serves no procompetitive goal.
`
`If Epic prevails, the App Store would not be dismantled. No
`
`customer would ever be required to use any of the things Apple complains
`
`about—an alternative app store, direct downloads for app distribution,
`
`or an alternative payment solution. The difference is that Apple would
`
`have to compete for its customers.
`
`Apple resorts to inflammatory rhetoric about Epic’s motivations.
`
`Projec