Thursday, September 16, 2021

Fortnite and In-App Purchases, Continued



Last year, I posted about Epic Games’ lawsuit against Apple, which claimed that Apple’s tight control over apps for iOs devices, particularly Apple’s in-app purchase system, violated antitrust and unfair competition laws. Now, a bit over a year later and after extensive coverage in technology and gaming circles, a judge in the Northern District of California has ruled on the merits of the case. The opinion is a mixed bag, as the court found in favor of Apple on most points but in favor of Epic on one claim; the court declined to find that Apple has an unlawful monopoly, but did find that Apple’s conduct in prohibiting app developers from providing information to consumers about payment alternatives was anticompetitive. While the ruling is narrow, it does open the door for mobile gaming developers to potentially avoid Apple’s commission on in-app purchases.

Taking the good news (at least for independent app developers) first, the court issued a nationwide injunction preventing Apple from prohibiting developers from including information in their apps and consumer communications regarding alternative purchasing mechanisms in addition to Apple’s proprietary in-app purchase system. This is potentially a very financially significant step, as Apple was previously requiring that developers of apps in its App Store only use Apple’s payment system for in-app purchases and was taking a commission of up to 30% on all such purchases. Now, developers will be able to inform customers about alternative channels to make these purchases, avoiding Apple’s commission, without being prevented from offering their app for download on the App Store. Consumers spend a massive amount of money on in-app purchases; one source estimates that consumers spent $32 billion on in-app purchases via the App Store and Google Play just in the first quarter of 2021. Many apps rely on in-app purchases for their profitability, and doubtless many developers will be very interested in avoiding Apple’s 30% commission, if possible.

As for Epic’s unsuccessful antitrust claim, a large part of the arguments turned on defining the “market” within which Apple was allegedly a monopolist. While somewhat technical, this fundamental struggle to define the relevant market goes to show how emerging technology does not necessarily fit easily within the boundaries of traditional legal or commercial analysis. Apple argued that the relevant market was the entire digital gaming market (featuring some interesting conceptual discussion of what, exactly, is a “video game”), whereas Epic argued that the relevant market was the market of all mobile apps running in the iOs ecosystem. The court disagreed with both, finding that the relevant market was that of “mobile gaming transactions.”

While this market may seem to be very narrow, the court noted that the “mobile gaming market itself is a $100 billion industry.” In fact, 70% of Apple’s App Store revenue was estimated to come from gaming apps as compared to other types of apps. The court ultimately found that Apple had about a 55% market share in digital mobile gaming transactions, with “extraordinarily high profit margins,” but that Epic had not produced enough evidence to show that Apple was a monopolist. The door appears to be cracked open for future monopoly claims against Apple, though, as the judge noted “the evidence does suggest that Apple is near the precipice of substantial market power, or monopoly power, with its considerable market share.”

For those interested in software, and particularly the mobile app market, the first part of the 185-page opinion is worth a read as it includes many interesting figures regarding consumer behavior and the app market. The Verge also has comprehensive discussion of this case for busy entrepreneurs who don’t have the time to (or interest in) reading legal opinions—especially if they aren’t suffering badly enough from insomnia to otherwise have a need to do so…

Epic has already appealed the court’s judgment to the Ninth Circuit, so this case is not over yet. It will be interesting to see whether the Ninth Circuit takes a broader view of the potential monopoly issues raised in this case and whether it agrees with the lower court that the relevant market is “digital mobile gaming transactions.” The universe of mobile apps has grown very quickly over the last decade and the legal system’s analysis will have to catch up. The fact that Epic succeeded in its challenge of Apple’s rule against developers informing consumers of alternate payment methods, however, suggests that app developers in other spheres might also start challenging the restrictions placed on them by Apple’s App Store and Google’s Play Store. And should Apple’s control over the market grow in the future, it’s possible that a new antitrust claim would succeed. 

Friday, September 3, 2021

U.S. Patent & Trademark Office Recognizing COVID-19 Inventions with Its 2021 Patent for Humanity Awards

It is often said that necessity is the mother of invention.

The worldwide impact of the COVID-19 virus has been quick and extensive, affecting every corner of the globe nearly immediately. As a result, the far-reaching effect of the pandemic has led to numerous inventions and discoveries that have greatly benefitted society, allowing some return to “normalcy”.

Notably, a collective focus on the COVID-19 virus has led to game-changing advancements in the research, scientific, and medical communities, with the development of quicker, more accurate and more convenient testing for COVID-19, the creation of new therapies for treatment of infected patients, and the development and widespread introduction of multiple safe and effective vaccines using groundbreaking techniques with dozens more in clinical trials.

Thursday, August 26, 2021

TikTok: A Resource for Small Business

For many small businesses, social media can bring significant value. It can allow businesses to engage with customers in a cost-effective way, collect and track customer engagement, gain insight into competition, and develop and grow their brand.

Because of these advantages, many small businesses now utilize one or more of the many social media platforms out there – LinkedIn, Facebook, YouTube, Twitter and Instagram, to name a few of the most popular. TikTok, a relatively new social media platform, has also started to grow in popularity. 

Wednesday, August 18, 2021

Has Kanye Correctly Timed the Release of His New Album?

On July 18, 2020, Kanye West tweeted that July 24, 2020 would be the release date of Donda, his tenth album, named in honor of his late mother, Donda West.  Days later, on July 23, 2020, Taylor Swift made a surprise announcement that she too would be releasing a new album on July 24, 2020.  When July 24 rolled around, Swift released her album (folklore) while Kanye didn’t, with some speculating Kanye did not want Swift to outshine him.  (The two have been feuding since 2009 when Kanye went on stage and interrupted Swift’s acceptance speech at the MTV Video Music Awards.)  Since summer 2020, Swift’s folklore won Album of the Year at the Grammy Awards, and Kanye has run for president, been divorced from Kim Kardashian, and dated supermodel Irina Shayk, but he has still not released his new album.  But rather than being a detriment to the album, the long delay has built a massive amount of hype around Donda.

Thursday, August 12, 2021

Malcolm Gladwell, The Bomber Mafia: A Dream, a Temptation, and the Longest Night of the Second World War (Little, Brown and Company, 2021).

Malcolm Gladwell is one of my favorite authors, as evidenced by my earlier reviews here, here, and here, but it’s been a while since I’ve dived into something new from him.

A few weeks ago, while browsing mask-free (alas, how short that interval was!) at my favorite big-box bookstore, I stumbled upon Gladwell’s latest offering, The Bomber Mafia. The World War II subject seemed a bit beyond his usual psychosocial playground, but the book looked like a quick read, and besides it was in the “50% off” bin.

Gladwell does not disappoint, coming through again with lessons for the entrepreneur. Though framed as a war story, he seeks an answer to a question with much broader reach: “How is it that, sometimes for any number of unexpected reasons, technology slips away from its intended path?”

Wednesday, August 4, 2021

What Can an Entrepreneur Learn from the Olympics?

There’s been a lot written about how nobody is watching the 2020 Tokyo Olympics. (Yes, I know they are happening now in 2021 because of the COVID pandemic, but they are still calling them the 2020 games.) Well, that hasn’t been the case in my household. We’ve enjoyed watching all sorts of competition so far, especially volleyball (a family favorite), swimming, and, of course, St. Paul’s own, Suni Lee, the first Hmong-American Olympian, who won the gold medal in the Olympic women’s gymnastics all-around!

In any event, seeing a blog post on my “to do” list for this week in the middle of my Olympic binging led me to search for interesting Olympic entrepreneurial tidbits. What I found was quite a bit of content, including this article about Olympic athletes who are thriving as entrepreneurs. While many of the individuals listed had later success in sports-related businesses, their successes also included perfume, coffee, and the well-known George Foreman grill

There are also many articles about lessons that entrepreneurs can learn from the habits of Olympic athletes (in articles like this onethis one, and, more recently, this one or this one).  Let me summarize some of the common (and relatively obvious) takeaways, since you may not have time to read them all:

  • It takes a team to be successful—don’t try and do it all yourself.
  • Follow your passion—trying to build a business is a challenge in itself, but growing a business in something you are not passionate about is even more difficult!
  • It takes hard work to be successful and you should be preparing to succeed from the very start.
  • Stay focused on the long goal—ye
    ars of training lead to Olympic success; it doesn’t happen overnight. Of course, you can always take the advice of Mark Spitz, the most successful American Olympic swimmer of all time—with 7 gold medals, all in world record time, at the 1972 Munich Olympics—until a guy named Michael Phelps hit the pool. Spitz’s take? “I’m not concerned with tomorrow, but with what goes on today.”
  • Flexibility is key—learn to roll with the punches because nothing goes as planned (remember all those hours training to culminate in Tokyo in the summer of 2020?).

Wednesday, July 28, 2021

The Ever-Changing Data Privacy Legal Landscape

It seems like a week does not go by without some new law or guidance that requires me to re-evaluate the advice given to businesses on how to comply with the ever-changing data privacy laws. 

Just as businesses were getting accustomed to the new compliance requirements imposed by the General Data Protection Regulation (GDPR), California surprised everyone and enacted the 2018 California Consumer Privacy Act (CCPA), which I discussed in this post. Businesses were quick to update privacy policies and implement new systems and processes to comply with both the GDPR and CCPA. Data subject access requests, known as DSAR’s, kept lawyers like myself and other compliance professionals busy.

The EU considers current USA data privacy protection safeguards as inadequate; as a result, a business cannot collect and process data of resident of the EU on a server based in the USA without finding some GDPR approved legal mechanism. When the so-called Privacy Shield was invalidated in July 2020 by the European Commission, businesses lost a popular safe harbor and were left with Standard Contractual Clauses (SCC’s) as a GDPR approved legal mechanism to permit the cross-border transfer of personal data from EU residents.

  • Then, on June 4, 2021, the European Commission adopted new SCC’s which, once again, will require businesses to re-evaluate their data processing activities.
  • In 2021 we have already seen Virginia and Colorado join California and pass their own versions of data privacy laws. 
  • On June 24 Connecticut passed a new cybersecurity law that provides incentives to businesses who implement reasonable data security.

It seems inevitable that other states will follow with their own flavor of data privacy rights for their residents. Each of these new state laws have similarities and differences that can make compliance a real challenge. While we can all hope for a comprehensive federal data privacy law that might allow businesses and their legal counsel to craft practical compliance programs, Congress is not likely to pass such a law anytime soon.