Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 1 of 303
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` VOLUME 13
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`
`
`Pages 3210 - 3511
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`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`Before The Honorable YVONNE GONZALEZ ROGERS, Judge
`
`)
`EPIC GAMES, INC.,
` )
` Plaintiff,
`) NO. C-20-5640 YGR
` )
` vs. ) Wednesday, May 19, 2021
` )
`APPLE, INC., ) Oakland, California
`)
`) BENCH TRIAL
` Defendant.
`____________________________)
`APPLE, INC.,
`)
`)
`)
` Counterclaimant,
` vs. )
`)
`)
`)
`)
` Counter-Defendant.
`____________________________)
`
`EPIC GAMES, Inc.,
`
`
`
`REPORTER'S TRANSCRIPT OF PROCEEDINGS
`
`
`APPEARANCES:
`
`For Plaintiff: CRAVATH, SWAINE & MOORE, LLP
` 825 Eighth Avenue
` New York, New York 10019
` BY: KATHERINE B. FORREST, ESQUIRE
` GARY A. BORNSTEIN, ESQUIRE
`YONATAN EVEN, ESQUIRE
`(Appearances continued.)
`
`Reported By: Diane E. Skillman, CSR 4909, RPR, FCRR
` Pamela Batalo-Hebel, CSR 3593, RMR, FCRR
` Raynee Mercado, CSR 8258 RMR, CRR, FCRR
`
`TRANSCRIPT PRODUCED BY COMPUTER-AIDED TRANSCRIPTION
`
`CRAVATH, SWAINE & MOORE, LLP
`For Plaintiff:
` 825 Eighth Avenue
`
`
`
` VOLUME 13
`
`
`
`Pages 3210 - 3511
`
`UNITED STATES DISTRICT COURT
`
`NORTHERN DISTRICT OF CALIFORNIA
`
`Before The Honorable YVONNE GONZALEZ ROGERS, Judge
`
`)
`EPIC GAMES, INC.,
` )
` Plaintiff,
`) NO. C-20-5640 YGR
` )
` vs. ) Wednesday, May 19, 2021
` )
`APPLE, INC., ) Oakland, California
`)
`) BENCH TRIAL
` Defendant.
`____________________________)
`APPLE, INC.,
`)
`)
`)
` Counterclaimant,
` vs. )
`)
`)
`)
`)
` Counter-Defendant.
`____________________________)
`
`EPIC GAMES, Inc.,
`
`
`
`REPORTER'S TRANSCRIPT OF PROCEEDINGS
`
`
`APPEARANCES:
`
`For Plaintiff: CRAVATH, SWAINE & MOORE, LLP
` 825 Eighth Avenue
` New York, New York 10019
` BY: KATHERINE B. FORREST, ESQUIRE
` GARY A. BORNSTEIN, ESQUIRE
`YONATAN EVEN, ESQUIRE
`(Appearances continued.)
`
`Reported By: Diane E. Skillman, CSR 4909, RPR, FCRR
` Pamela Batalo-Hebel, CSR 3593, RMR, FCRR
` Raynee Mercado, CSR 8258 RMR, CRR, FCRR
`
`TRANSCRIPT PRODUCED BY COMPUTER-AIDED TRANSCRIPTION
`
`CRAVATH, SWAINE & MOORE, LLP
`For Plaintiff:
` 825 Eighth Avenue
`
`
`
`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 2 of 303
`
`3211
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` New York, New York 10019
` BY: LAUREN A. MOSKOWITZ, ESQUIRE
`JUSTIN C. CLARKE, ESQUIRE
`W. WES EARNHARDT, ESQUIRE
`BRENDAN BLAKE, ESQUIRE
`JIN NIU, ESQUIRE
`BRENT BYARS, ESQUIRE
`
`
`
`
`
`For Defendant: GIBSON, DUNN & CRUTCHER
` 333 South Grand Avenue
` Los Angeles, California 90071
` BY: RICHARD J. DOREN, ESQUIRE
`DAN SWANSON, ESQUIRE
`CYNTHIA RICHMAN, ESQUIRE
`RACHEL BRASS, ESQUIRE
`
`
`
`
`
`
`GIBSON, DUNN & CRUTCHER, LLP
`2001 Ross Avenue, Suite 1100
`Dallas, Texas 75201
` BY: VERONICA S. MOYE, ESQUIRE
`
`PAUL WEISS RIFKIND
`WHARTON & GARRISON LLP
`2001 K STREET, NW
`Washington, DC 20006
` BY: KAREN DUNN, ESQUIRE
`JESSICA E. PHILLIPS, ESQUIRE
`
`For Defendant:
`
`PAUL WEISS RIFKIND
`WHARTON & GARRISON LLP
`943 Steiner Street
`San Francisco, California 94117
` BY: ARPINE LAWYER, ESQUIRE
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 3 of 303
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`3212
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`Defendant's Witnesses:
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`Page
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` Vol.
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`Schmid, Michael
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`Direct Examination by Mr. Srinivasan
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`Cross-examination by Ms. Moskowski
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`Redirect Examination by Mr. Srinivasan
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`Examination by the Court
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`Further Recross-examination by Ms. Moskowski
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`Federighi, Craig
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`Direct examination by Mr. Lo
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`Cross-examination by Mr. Even
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`Redirect Examination by Mr. Lo
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`Recross-Examination by Mr. Even
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 4 of 303
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`Plaintiff's Exhibits:
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`Evd. Vol.
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`Defendant's Exhibits:
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`Evd. Vol.
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`2282
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 5 of 303
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`3214
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`Wednesday, May 19, 2021 8:00 a.m.
`
`P R O C E E D I N G S
`
`THE CLERK: Calling civil action 20-5640, Epic Games,
`
`Inc. versus Apple, Inc.
`
`And counsel, please state your appearances.
`
`MS. FORREST: Good morning, Your Honor. Katherine
`
`Forrest for Epic.
`
`THE COURT: Good morning, Ms. Forrest.
`
`MS. MOSKOWITZ: Good morning, Your Honor. Lauren
`
`Moskowitz for Epic.
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`THE COURT: Yes, good morning, Ms. Moskowitz. Mr.
`
`Even.
`
`for Epic.
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`MR. EVEN: Good morning, Your Honor. Yonatan Even
`
`MR. CARVAJAL: Good morning, Your Honor. Alex
`
`Carvajal for Epic.
`
`THE COURT: Good morning.
`
`MR. NIU: Good morning, Your Honor. Jin Niu for
`
`Epic.
`
`THE COURT: Good morning.
`
`Mr. Sweeney, good morning, sir.
`
`Mr. Rudd, good morning.
`
`MR. RUDD: Good morning.
`
`THE COURT: All right. On the Apple side.
`
`MR. DOREN: Good morning, Your Honor. Richard Doren
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 6 of 303
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`3215
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`for Apple. And joining us this morning are Heather Grenier
`
`and Stephanie Fine, in-house counsel at Apple.
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`THE COURT: Okay. So Stephanie, this is new, right?
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`Okay. And the last name again, please?
`
`MS. FINE: Fine. F-I-N-E.
`
`THE COURT: F-I-N-E. Okay, thank you. Good morning
`
`and welcome.
`
`MR. SRINIVASAN: Good morning, Your Honor. Jay
`
`Srinivasan for Apple.
`
`THE COURT: Good morning.
`
`MS. YANG: Good morning, Your Honor. Betty Yang for
`
`Apple.
`
`THE COURT: Yang. Welcome back.
`
`MS. YANG: Thank you, Your Honor.
`
`THE COURT: Mr. Spalding.
`
`MR. SPALDING: Good morning, Your Honor.
`
`THE COURT: Good morning.
`
`Then is that Ms. Adams I see back there?
`
`MS. ADAMS: Good morning, yes.
`
`THE COURT: Good morning.
`
`And maybe Mr. Phillips.
`
`MR. PHILLIPS: Yes, good morning, Your Honor.
`
`THE COURT: Good morning.
`
`Okay, the other two I'm not sure I recognize. Mr. Doren,
`
`can you help me there?
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 7 of 303
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`3216
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`MR. DOREN: Oh, I'm sorry.
`
`Jennifer Rho, Your Honor. R-H-O.
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`THE COURT: And one other?
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`MR. DOREN: Oh, and Dana Li, L-I.
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`THE COURT: Okay, welcome.
`
`And then I believe it looks like we have a few more
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`people.
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`So today is Wednesday.
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`Mr. Manfredi, good morning, welcome back.
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`And then from the press, we have same as yesterday. So
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`Mr. Cisco from the information. Good morning.
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`And Bobby Ellen from NPR. Good morning.
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`And then we have the witness.
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`And one other person in the courtroom.
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`MS. BESHLIAN: Good morning, Your Honor. Ana --
`
`THE COURT: Ms. Forrest?
`
`MS. BESHLIAN: -- Your Honor.
`
`THE COURT: Is -- is she with Epic?
`
`MS. FORREST: She is. She is one of our paralegals
`
`handling the logistics, Your Honor.
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`THE COURT: And her name again, Ms. Forrest?
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`MS. FORREST: Anna Beshlian.
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`THE COURT: Okay. Welcome to the courtroom.
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`MS. BESHLIAN: Thank you.
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`THE COURT: Ms. Forrest, do we have any issues to
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 8 of 303
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`3217
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`address this morning?
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`MS. FORREST: Not issues, Your Honor. Just sort of
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`two points of information.
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`One is -- or and a request, on the essential facilities
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`motion that Apple had made yesterday, we wanted to ask Your
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`Honor when we should respond so that Your Honor can consider a
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`written response. We plan to address it also orally on
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`Monday.
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`THE COURT: Right.
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`MS. FORREST: If Sunday works for Your Honor, we
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`could do it then. But we don't want to presume that that's a
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`good time for Your Honor. So we want to elicit what the
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`appropriate time would be.
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`THE COURT: Maybe -- maybe today is the proper day
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`to -- in light of that -- to let folks know and -- and in part
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`people listening who are not familiar with the legal process,
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`that you will not have an answer on Monday and you will not
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`have an answer on Tuesday. I believe Judge Koh's opinion in
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`the Qualcomm case was about 250 pages long. I will go through
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`on Monday how much evidence is in this case and how much
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`evidence has to be reviewed and considered by me. And I've
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`got a very tiny team helping me.
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`So Sunday is fine because there's just no way that I'm
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`going to rule automatically on it.
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`MS. FORREST: Would Sunday at 6:00 p.m. then, Your
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 9 of 303
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`3218
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`Honor, be acceptable?
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`THE COURT: You know what, if you're going to do it
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`at 6:00 p.m., it doesn't matter when on Sunday you do it
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`because I won't look at it at 7:00.
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`MS. FORREST: Would earlier in the day on Sunday mean
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`that Your Honor would have a chance to consider it before
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`Monday? 'Cause we could do any time. I just -- I hesitate to
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`take up your Sunday but --
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`THE COURT: I've worked every weekend since we've
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`started.
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`I think the other thing people should know is that federal
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`judges have hundreds of cases. Our cases do not go away when
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`we're in trial. I explain to jurors when I tell them that we
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`end the trial day at 1:30 with -- we go from 8:00 to 1:30, two
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`15-minute breaks, and it's not because I like to take long
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`lunches. It's because I have hundreds of other cases to deal
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`with after we finish with our trial day. And this doesn't --
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`this isn't any different.
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`So I -- I think noon is probably better.
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`MS. FORREST: That works for us, Your Honor. Thank
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`you.
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`THE COURT: So I will look at it, I'll look at the
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`docket at noon on Sunday.
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`MS. FORREST: The only other issue was just a point
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`of information is that on the document PX1904 that was clawed
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 10 of 303
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`3219
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`back on privilege grounds yesterday -- that word is not a --
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`just for the record, the word "clawback" is the word that's a
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`technical term of art in the legal community for taking back a
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`document in terms of privilege. So it's a perfectly
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`appropriate way for Apple to have done this.
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`Apple asserted privilege over the document, clawed it
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`back. We are briefing that currently in front of Judge
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`Hixson, and we are -- the parties are engaged in the typical
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`we've sent Apple our portion, they will then send us their
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`portion, but it's happening in realtime. We have now already
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`sent our portion to Apple.
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`THE COURT: Okay. And -- and yes, I agree with you.
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`That's a technical term in the legal community.
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`MR. DOREN: Your Honor, just two administrative
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`matters.
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`The first is on the timing of Mr. Cook's testimony.
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`THE COURT: Yes.
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`MR. DOREN: We are hoping and requesting that he be
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`permitted to testify at 8:15 on Friday. And if we -- we are
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`trying to bring everything in for a -- for a landing, to have
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`that be -- he be our last witness on Friday morning.
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`In the event for some reason, since we don't control
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`cross, if we haven't concluded by Thursday, we would still
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`like to start with Mr. Cook, and conversely if we finish a few
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`minutes early on Thursday, we would still request to start
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 11 of 303
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`3220
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`with Mr. Cook at 8:15 on Friday.
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`THE COURT: Any objection?
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`MS. FORREST: We have no objection to that, Your
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`Honor.
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`Just so that the record is clear, we notified Apple this
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`morning that we may call, not will call, but we may call some
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`very short rebuttal witnesses. And that could occur then
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`after Mr. Cook's testimony.
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`THE COURT: Okay.
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`MR. DOREN: And then secondly, Your Honor, purely on
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`the housekeeping end of things, I've been asked to ask when we
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`can start removing materials. We thought the day would never
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`come. If we could do that work Friday afternoon, if it won't
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`inconvenience the Court. If it will, we would do it Monday.
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`THE COURT: I -- I think the best person to ask is
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`Ms. Stone. I don't know if her preference is for people to
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`slowly start taking it.
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`I've done numerous cases where we have lots of binders.
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`This kind of case might not be the case that I'd do it again
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`in this way. But you're -- I'm not going to them anymore. I
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`did initially, but I'm not anymore.
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`So you're welcome to take my set as long as you have
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`permission from Ms. Stone to access the courtroom.
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`MR. DOREN: Thank you, Your Honor. We will discuss
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`it with her.
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 12 of 303
`SCHMID - DIRECT (RESUMED) / SRINIVASAN
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`3221
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`THE COURT: Okay.
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`MR. DOREN: Thank you.
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`MS. FORREST: Thank you.
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`THE COURT: All right.
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`Hearing nothing else, let's go ahead and bring Mr. Schmid
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`back to the stand.
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`THE COURT: Good morning, sir.
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`THE WITNESS: Good morning, Your Honor.
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`THE COURT: You are still under oath. Do you
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`understand?
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`THE WITNESS: I do.
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`THE COURT: Mr. Srinivasan, you may begin.
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`MR. SRINIVASAN: Thank you, Your Honor.
`
`Jay Srinivasan for Apple.
`
`DIRECT EXAMINATION (RESUMED)
`
`BY MR. SRINIVASAN:
`
`Q.
`
`Mr. Schmid, you testified yesterday that you are head of
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`games business development for the App Store. Did I get that
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`right?
`
`A.
`
`Correct.
`
`Q.
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`And in that capacity, how many game developers do you and
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`your team engage with?
`
`A.
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`We engage with hundreds of developers globally many times
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`a year. So often we'll meet with them weekly, sometimes
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`monthly, sometimes quarterly. And then there's, you know, the
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 13 of 303
`SCHMID - DIRECT (RESUMED) / SRINIVASAN
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`3222
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`occasional developer we'll only touch base with once every
`
`year or so.
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`Q.
`
`Okay. And how about you personally, to what extent do you
`
`engage with game developers?
`
`A.
`
`Every -- every day of my life. So many of my friends
`
`from, you know, before joining Apple are game developers, and
`
`I've continued to foster those relationships as well as grow
`
`many more relationships. So I talk to developers every day.
`
`Q.
`
`Okay. And -- and what type of game developers do you
`
`engage with?
`
`A.
`
`I engage with developers of all sizes. So we have, you
`
`know, the Activisions of the world, the EA's of the world, and
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`then game developers like Chain Reaction Games in Indiana
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`which are a father and son team that we met at WWDC a few
`
`years back. Talk to them -- I'm sorry. We talk to them on a
`
`monthly basis too. And, you know, we -- we try to focus our
`
`energy in the places where we feel like we can do the most
`
`good.
`
`Q.
`
`And is there a -- a set list of game developers that your
`
`team meets with that's a fixed group? Or is it some --
`
`some -- somehow different in how you decide who to meet with?
`
`A.
`
`The list is fairly fluid. There are certainly developers
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`we've been meeting with for many, many years that have never
`
`left our list. But there's developers that kind of come and
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`go, again based on resources and what's driving the business
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`3223
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`and what's popular on the App Store, et cetera.
`
`Q.
`
`Okay. And you mentioned, I think, a global team. Do you
`
`and does your group interact with developers all over the
`
`world?
`
`A.
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`We do. And we have a global team of business managers
`
`that we work very closely with to engage with developers in
`
`all regions and get local expertise and bring those expertise
`
`to developers in other regions and help them expand.
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`Q.
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`And what are the subjects that you cover with developers
`
`when you meet with them?
`
`A.
`
`We cover everything from monetization to marketing, to
`
`localization, to first-time user experience, to editorial
`
`support, to app review, to engineering support in some cases.
`
`So it's quite a wide list of cat -- or of subjects.
`
`Q.
`
`Okay.
`
`And you mentioned localization in that list. Can you
`
`explain what localization is?
`
`A.
`
`I'm sorry, yes. So localization is kind of what I
`
`referenced moments ago which is we'll -- we'll help a
`
`developer expand to a new market that they may not be in. In
`
`order to do that, they have to localize and actually translate
`
`the language in their game.
`
`But we -- we actually prefer a term called culturalization
`
`to take it a step further than just localization so we can
`
`really have a developer more deeply engaged with that market.
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`3224
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`Q.
`
`And do you personally play video games?
`
`A.
`
`I do. Maybe too much.
`
`Q.
`
`Well, I mean this sounds maybe like a silly question, but
`
`can you estimate how many video games you've played over the
`
`course of your career and life?
`
`A.
`
`Do you want me the start in, like, 1992? I think that --
`
`THE COURT: Is that when your life started?
`
`THE WITNESS: No. No, Your Honor. My life started a
`
`couple years before that.
`
`But it took me to about five before I could start really
`
`getting into games.
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`Thousands of games that -- and, yeah, of all ranges, all
`
`sorts of categories of games.
`
`BY MR. SRINIVASAN:
`
`Q.
`
`Okay. And can you turn back to DX5552, which we looked at
`
`yesterday? I think it was the only exhibit we looked at.
`
`A.
`
`(Reviewing document.)
`
`Q.
`
`Can you remind us again what DX5552 was?
`
`A.
`
`This is the categories pages on the App Store microsite on
`
`developer.apple.com.
`
`Q.
`
`A.
`
`Okay. And do these categories include podcasts?
`
`There is no podcast category. However, there are podcast
`
`apps that could categorize themselves as news or
`
`entertainment.
`
`Q.
`
`And these are apps on the App Store?
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`3225
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`A.
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`Correct.
`
`Q.
`
`And do these apps monetize, do you know?
`
`A.
`
`Some do.
`
`Q.
`
`Do you know how they do that?
`
`A.
`
`Apps, for instance, Overcast will monetize with a premium
`
`subscription that gives you some additional features. Some
`
`other apps will monetize by unlocking content through an
`
`in-app purchase or a subscription.
`
`Q.
`
`Okay. And does Apple have a podcast app?
`
`A.
`
`We do.
`
`Q.
`
`Okay. And is that app in the App Store?
`
`A.
`
`It comes directly on your phone when you purchase an
`
`iPhone.
`
`Q.
`
`And do you know if Apple currently monetizes its podcast
`
`app?
`
`A.
`
`They do not. They have not certainly since I've been
`
`using podcasts since the original iPod. So podcasts actually
`
`predates the App Store.
`
`Q.
`
`Okay. And do you know if Apple has a plan to add to that
`
`functionality?
`
`A.
`
`They do. There is a -- a service called Podcast Plus that
`
`will allow podcasters to monetize their podcast within the
`
`podcast app.
`
`Q.
`
`And that's -- is that currently available?
`
`A.
`
`It is not.
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`3226
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`Q.
`
`Okay. Back to this page DX5552, I just want to recap from
`
`yesterday. I think you mentioned that the App Store has a
`
`single tab for the games category and that everything else,
`
`all of these other categories, are going to be under the apps
`
`tab. Did I get that right?
`
`A.
`
`Correct.
`
`Q.
`
`And do you -- do you have an understanding of why that is?
`
`A.
`
`Games are the biggest category in the App Store. And we
`
`spend a lot of time and energy focused on, you know, games in
`
`a very different way than we've focused on apps. That's why
`
`we split the teams, both on editorial and the business side,
`
`but also those industries are fairly discrete as well.
`
`Q.
`
`When you say the industries are fairly discrete, what do
`
`you mean by that?
`
`A.
`
`So game developers are quite separate from app developers
`
`in many circumstances. There are exceptions like big
`
`organizations like Microsoft that, you know, have Microsoft
`
`Office as well as, you know, Minecraft and other -- other
`
`games.
`
`But generally speaking, game developers are focused on
`
`just developing games, and app developers are often focused on
`
`a single app or a suite of apps.
`
`Q.
`
`Okay.
`
`Other than games developers generally not making nongame
`
`apps, anything else that sets game developers apart from other
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`3227
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`developers?
`
`A.
`
`The technology so -- whoop, I'm so sorry.
`
`The technology certainly sets them apart. So game
`
`developers will often use Unreal Engine or Unity. And app
`
`developers typically don't go that route. They don't use an
`
`off-the-shelf engine like that.
`
`But also game developers tend to be a little bit more on
`
`the what we call the bleeding edge as far as graphics
`
`processing and technology generally. I don't want to say
`
`without caveat because there's certainly creative apps that
`
`really push the limits of what graphics processing can do, but
`
`game developers are certainly in a different category because
`
`of that.
`
`Q.
`
`Okay. And are game developers different in how they
`
`monetize compared to other developers and app developers in
`
`general?
`
`A.
`
`Often, yes. So as I mentioned yesterday, there's in-app
`
`purchase, and that's becoming a more frequent or more widely
`
`used monetization path, a free app or game and then with
`
`in-app purchase. There's certainly still a premium market of
`
`games where there will be a larger purchase up front, but many
`
`app developers now are really focused on subscription revenue
`
`and growing a subscription business, whereas game developers
`
`not as much.
`
`Q.
`
`And I apologize if I covered this yesterday. But I
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`3228
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`believe you -- is it the case that game developers are using
`
`in-app currency as part of their game?
`
`A.
`
`Correct.
`
`Q.
`
`And is that use becoming --
`
`THE COURT: Can you hold on just a minute.
`
`I just received a note that our public line is not working
`
`so let me stop the clock.
`
`And sometimes -- I just want to say, the Court does not
`
`control the telephone line. And sometimes something happens
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`in the ether and the line doesn't work. So let's just hold on
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`a minute and make sure we get the line reconnected.
`
`(Pause in the proceedings.)
`
`THE COURT: Okay. Do we have lawyers from LA?
`
`Okay, raise your hand.
`
`Okay. Warriors are on tonight.
`
`(Off-the-record discussion.)
`
`(Pause in the proceedings.)
`
`THE COURT: Okay. It looks like -- I understand from
`
`Ms. Stone that the line is up and running again.
`
`Yes, Ms. Stone?
`
`Let's see. Okay. I'm being told to wait.
`
`(Discussion off the record.)
`
`MS. FORREST: And, Your Honor, on the topic of what
`
`might be different when the pandemic is over, I think it has
`
`been eye-opening to see what can be done remotely in terms of
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`3229
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`certain court proceedings that might not take a lot of time,
`
`but my -- for, you know, counsel located all over the country,
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`otherwise have required lots of travel time. So it's been, I
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`think, an eye-opening experience in that regard as well to see
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`what can be done once we resume.
`
`THE COURT: Yeah, I think so. I mean I -- you know,
`
`I was never one to allow -- to allow many people to appear by
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`telephone because I am -- I actually learn a lot when engaging
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`in person with lawyers, whether, you know, a case -- my case
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`management conferences, as you all know, are very substantive.
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`I like to know what's going on. I try to understand kind of
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`the -- the whole purview of the cases.
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`And I just cannot -- I cannot -- I can't get the same kind
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`of information when I have people on a telephone line. Once
`
`I've established a relationship with the lawyers, then
`
`telephone lines are easier to do because you know each other.
`
`I don't mind Zoom as much.
`
`MR. SRINIVASAN: Yes.
`
`THE COURT: So -- okay. So we have one -- okay. So
`
`now, I --
`
`(Off-the-record discussion.)
`
`THE COURT: Let's make sure that time doesn't count
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`against counsel.
`
`Looks like you can proceed now. Thank you.
`
`MR. SRINIVASAN: Thank you, Your Honor.
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`3230
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`Q.
`
`Mr. Schmid, do you have an understanding of why in-app
`
`currencies have become more prevalent in game apps?
`
`A.
`
`Yes. As I mentioned yesterday, it allows a developer to
`
`maintain more control over an economy that goes across many
`
`platforms. So I'll try to simplify it or explain it as simply
`
`as possible, rather.
`
`We have in game development or in free-to-play game
`
`development sources --
`
`(Clarification by the court reporter.)
`
`THE WITNESS: Yes, I'm so sorry.
`
`So in mobile game development, specifically free to play,
`
`we have something called sources and syncs, the source being
`
`that in-app currency that you purchase and the sync being
`
`where you're spending that currency, so on an outfit or an
`
`item in a game.
`
`And that purchase, that in-app purchase is actually of
`
`that source. So that source currency is what you're
`
`purchasing. And that price can vary from region to region.
`
`But what the developer prefers to do is stabilize the cost of
`
`the item that you purchase using that in-app currency.
`
`Did I explain that okay?
`
`BY MR. SRINIVASAN:
`
`Q.
`
`That made sense to me.
`
`A.
`
`Okay.
`
`Q.
`
`So if a user doesn't want to pay a commission, for
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`3231
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`instance, on the App Store to Apple, is it possible to make an
`
`in-app purchases of an in-game currency in a way to avoid
`
`that?
`
`A.
`
`Yes.
`
`MS. MOSKOWITZ: Objection.
`
`THE COURT: What's the objection?
`
`MS. MOSKOWITZ: Form.
`
`THE COURT: You mean in terms of leading?
`
`MS. MOSKOWITZ: In terms of leading and the terms
`
`used in the -- in the first part of that question, which now
`
`has exited the screen.
`
`MR. SRINIVASAN: I mean --
`
`THE COURT: You can rephrase.
`
`MR. SRINIVASAN: Sure.
`
`THE COURT: I don't think it's really objectionable.
`
`But go ahead, rephrase.
`
`BY MR. SRINIVASAN:
`
`Q.
`
`Is there a way for a user to avoid the Apple commission in
`
`making an in-app currency purchase?
`
`A.
`
`Yes.
`
`Q.
`
`How would they do that?
`
`A.
`
`So a game developer may make an in-app purchase available
`
`on many platforms aside from the App Store. They can also
`
`make that purchase available on desktop web or mobile web.
`
`It's completely at the discretion of a game developer. And
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`3232
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`then a user can choose where they'd like to purchase.
`
`Q.
`
`And can you give us examples of games where that's
`
`achievable?
`
`A.
`
`One example would be Hearthstone which allows you to make
`
`purchases on Battle.net on your PC, also on mobile web, also
`
`in the iOS app.
`
`Another example would be Roblox which allows you to make
`
`purchases on web, on the desktop app, as well as iOS.
`
`Another example would be Candy Crush which makes -- allows
`
`you to make purchases in the mobile app, on desktop web, and
`
`on Android.
`
`So most of the time when I'm mentioning games that are
`
`cross-platform, on the mobile side you can almost guarantee
`
`they would also be available both as the app itself on Android
`
`and the same in-app purchases on Android.
`
`Q.
`
`Okay. And maybe we can -- let's do -- if we may, let's do
`
`a demonstrative of what you're talking about here.
`
`If we could put up one of the disclosed demonstratives.
`
`(Demonstrative published.)
`
`BY MR. SRINIVASAN:
`
`Q.
`
`This is with respect to Hearthstone.
`
`Before we get going on this, I think you mentioned the
`
`game Hearthstone in your list of apps that allow this type of
`
`functionality; is that right?
`
`A.
`
`Correct.
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`3233
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`Q.
`
`And what is Hearthstone?
`
`A.
`
`It is a free-to-play game by Blizzard Entertainment. It
`
`is a card battler or a card collecting game. So I call it a
`
`card battler 'cause you're collecting packs of cards, building
`
`a deck, and then battling others with that deck.
`
`Q.
`
`A.
`
`Okay. And can players make purchases within Hearthstone?
`
`They can. They can purchase expansion packs with content
`
`as well as new cards or card decks.
`
`Q.
`
`And what channels can you make purchases on with -- for
`
`Hearthstone?
`
`A.
`
`On the App Store. You can also purchase the same decks on
`
`Android on the Google Play Store, as well as on Battle.net on
`
`your PC or on mobile web or desktop web.
`
`Q.
`
`Okay. And this particular demonstrative that we have
`
`here, did you create this demonstrative?
`
`A.
`
`I did.
`
`Q.
`
`And how did you do that?
`
`A.
`
`I recorded it on my phone.
`
`Q.
`
`Okay. And do you recall when you did it?
`
`A.
`
`Two days ago.
`
`MR. SRINIVASAN: Okay. And, Your Honor, if we can
`
`run the video, and is it all right if Mr. Schmid sort of
`
`narrates that as we run it?
`
`THE COURT: Okay, go ahead.
`
`(Video playing.)
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 25 of 303
`SCHMID - DIRECT (RESUMED) / SRINIVASAN
`
`3234
`
`THE WITNESS: Okay. So we're entering Hearthstone,
`
`which is on my phone. I'm already logged into my account.
`
`It's a Battle.net account with my email address.
`
`I'm going to see that I have no packs available to open.
`
`So if I click my open packs, there's nothing there.
`
`However, I can go back to the shop and see all the packs
`
`that are available for purchase or all the bundles as well.
`
`So I'm going to find one that I like. Scroll down here.
`
`Forged in the Barrens is one of the newer expansion packs. So
`
`I'm going to look at the card packs for that.
`
`It is 2.99 for two packs. I'm not going to buy it here.
`
`I'm going to exit the game. And I'm going to go mobile Safari
`
`where I go to Battle.net. Again I'm logged into an account
`
`that I've had since long before the App Store was around.
`
`I click on Hearthstone, and I can see all the purchases
`
`that are available on mobile web. I click Forged in the
`
`Barrens. I buy a 2.99 pack. And, again, because I've had
`
`this account since before the App Store, my payment
`
`information is already saved in there. I click "pay now."
`
`Okay. Purchase was successful. I go back to Hearthstone.
`
`And upon log-in, it should immediately show the card packs.
`
`It did in this case.
`
`So card packs are granted. And I can see that little "2"
`
`flag next to open packs, which means I have some packs I can
`
`open. And I get to experience the joy of what is inside. We
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`Case 4:20-cv-05640-YGR Document 756 Filed 05/26/21 Page 26 of 303
`SCHMID - DIRECT (RESUMED) / SRINIVASAN
`
`3235
`
`have Toad of the Wilds, Sada [phonetic], Devouring Plague,
`
`very nice.
`
`And then the second pack, I won't name all the cards, but
`
`it's very exciting for me.
`
`BY MR. SRINIVASAN:
`
`Q.
`
`So, and Mr. Schmid, I believe when you went to the web,
`
`you purchased somet
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