Case 4:20-cv-05640-YGR Document 226 Filed 12/31/20 Page 1 of 9
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`UNITED STATES DISTRICT COURT
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`NORTHERN DISTRICT OF CALIFORNIA
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`Case No. 20-cv-05640-YGR (TSH)
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`DISCOVERY ORDER
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`Re: Dkt. No. 213
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`EPIC GAMES, INC.,
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`Plaintiff and Counter-
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`defendant,
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`v.
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`APPLE INC.,
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`Defendant and
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`Counterclaimant.
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`We are here on a joint discovery letter brief concerning Apple’s responses to Epic Games’
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`requests for production (“RFPs”). ECF No. 213. The Court held a hearing on December 30,
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`2020, and now issues this order.
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`A.
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`Non-U.S. Documents
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`The first dispute is over Apple’s general refusal to produce documents concerning its
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`activities outside the United States. Apple has agreed to produce documents that reference its
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`activities both within and outside of the U.S., as well as documents relating to Epic’s own dealings
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`with Apple outside of the U.S. But it will not agree to produce documents that reference only
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`extraterritorial conduct and that do not relate to Epic. Epic says this geographic limitation is
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`unjustified, and it moves to compel documents relating to foreign activities on all 70 RFPs in its
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`first set of RFPs.1
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`1 Epic has provided its first set of RFPs as Exhibit 1 to the joint discovery letter brief. Apple
`reports in its section of the letter brief that Epic has served a total of 83 RFPs. At the hearing Epic
`explained that its current motion relates only to the first 70 RFPs, but that the same dispute
`concerning geographic scope of Apple’s production also applies to the other RFPs not currently
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`Case 4:20-cv-05640-YGR Document 226 Filed 12/31/20 Page 2 of 9
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`Notwithstanding its assertion that it has alleged global markets, Epic is suing under the
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`federal Sherman Act, the California Cartwright Act, and California Business and Professions Code
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`section 17200. See ECF No. 1 (Complaint). Therefore, wholly extraterritorial conduct not
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`directed at the U.S. cannot be a basis for liability in this case. Having said that, foreign conduct
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`can sometimes be relevant evidence of domestic conduct. The clearest example of this is an
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`international price-fixing conspiracy where you have to see the whole conspiracy to know how
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`broad it is, the role the various executives played, how the conspiracy was enforced and concealed,
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`and so on, before you can really understand what happened in the U.S. See, e.g., In re Aspartame
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`Antitrust Litig., 2008 WL 2275531, *2 (E.D. Pa. May 13, 2008) (citing cases). However, in other
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`cases, documents about purely foreign conduct may not be relevant. Rule 26 limits discovery to
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`what is relevant and proportional, after all, and the Foreign Trade Antitrust Improvements Act
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`generally removes from antitrust liability commercial activities abroad, subject to a few
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`exceptions. See U.S. v. Hui Hsuing, 778 F.3d 738, 751 (9th Cir. 2015).
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`So, the Court cannot endorse a simplistic holding that documents about foreign conduct are
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`always relevant or never relevant because neither proposition is true. Instead, the analysis comes
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`down to having a good theory of relevance. The moving party needs to explain why documents
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`concerning foreign activities are relevant to U.S. claims or defenses, and the Court must conduct a
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`careful analysis to determine if the foreign documents actually would be relevant. See, e.g., In re
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`eBay Seller Antitrust Litig., 2008 WL 3925350, *1-2 (N.D. Cal. Aug. 22, 2008) (“relevance does
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`not necessarily stop at the shores of the United States,” so “at least some of the agreements with
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`the third parties, including those connected to activities overseas, may reflect upon plaintiffs’
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`claims,” but “[t]hat said, to require production of all third party agreements and backup materials
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`at this junction would be premature in light of the significant probability that a number of these
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`contracts and agreements may have nothing whatsoever to do with the issues in this litigation”).
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`Here, Epic has explained nothing. Epic’s assertions that it alleges worldwide markets and
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`that Apple also refers to its worldwide presence as part of its business justification defense do not
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`before the Court.
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`even begin to explain how documents about purely foreign conduct that are responsive to any of
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`these RFPs are relevant.2 The key legal principle that Epic misunderstands is that relevance is
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`measured against “any party’s claim or defense,” Fed. R. Civ. Proc. 26(b)(1). All of the claims
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`and defenses in this case arise under U.S. or California law, not some non-existent worldwide
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`antitrust law. To show relevance, Epic must explain – as the plaintiffs did in In re Aspartame
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`Antitrust Litig. and In re eBay Seller Antitrust Litig. – how the foreign documents it seeks would
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`tend to prove or disprove claims under U.S. or California law, claims that by definition have a
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`limited geographic reach. But here, Epic abjures that task entirely, insisting that because its
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`Complaint alleges global markets, it has no obligation to explain how the documents are relevant
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`within the meaning of Rule 26 to claims or defenses under U.S. domestic law. In Epic’s view, the
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`word “global” has magical power when used in a Complaint, wiping away the requirement of
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`relevance in discovery. The Court disagrees.
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`Consider RFP 59, which seeks “All Documents Concerning Customers’ awareness of,
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`familiarity with, lack of awareness of, and/or lack of familiarity with (a) the fact that Apple does
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`not permit any Software Store on iOS devices other than the iOS App Store; (b) the fact that
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`Apple does not allow Developers to use any method other than Apple’s IAP for accepting
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`payments from Customers for certain types of transactions; or (c) Apple’s fee or commission on
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`the purchase of Apps and Apple’s IAP transactions.” This RFP seems to be getting at a Kodak-
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`style “lock in” argument, suggesting that maybe customers don’t know what they’re getting into
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`when they buy an iPhone and then later it’s too expensive to switch. But why should we care
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`what foreign customers are aware of when they buy an iPhone? When the Court raised this
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`example at the hearing, Epic just repeated that it is alleging worldwide markets, but it did not
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`actually explain how the awareness or lack of awareness that people in foreign countries might
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`have could be relevant to the Sherman Act and California law, which don’t regulate Apple’s
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`transactions with foreign customers.
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`Or consider RFP 28. It requests: “Documents sufficient to show the number and
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`2 The Court has also reviewed Epic’s meet and confer correspondence that was attached to the
`joint discovery letter brief. That correspondence added nothing of substance on this issue.
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`percentage of iPhone, iPad or iPod touch Customers, respectively, who own at least one iPhone,
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`iPad or iPod touch and used any of the following in the last 30, 90, 180 or 365 days, respectively:
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`(a) Apple Music; (b) Apple TV+; (c) Apple News; (d) Apple Arcade; (e) Apple Pay; (f) Apple
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`Card; (g) iMessage; (h) FaceTime; (i) Find My; (j) AirDrop; (k) iCloud Photos; (l) iCloud Drive;
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`(m) iTunes; (n) Apple Books; (o) Family Sharing; (p) Apple One; and (p) none of the above.” The
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`Court has a hard time understanding why we need to know how many people in Mongolia tried to
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`find their iPhone in the last month, or what percentage of iPad users in Sri Lanka use Apple pay,
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`or how popular FaceTime is in Brazil. How would such evidence be relevant to claims and
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`defenses under U.S. and California law? Epic doesn’t say. At the hearing Epic did not dispute
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`that RFP 28 asks for these things and did not present argument for why that information is relevant
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`to the U.S. and California claims and defenses in this case. Instead Epic argued that it did not
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`demand document custodians who are in those foreign countries. In other words, Epic argued that
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`it did not go out of its way to seek out documents that relate exclusively to foreign conduct. Well,
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`that’s good, but it still doesn’t answer the Court’s question about relevance. Epic says that if a
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`document is in the custodial collection of one of Apple’s document custodians, Apple should not
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`code it non-responsive merely because it relates to exclusively foreign conduct. However, that
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`appears to be an argument about burden and leaves unanswered the Court’s skepticism about the
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`relevance of such documents to claims and defenses under U.S. domestic law.
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`For a lot of the RFPs at issue, the Court can on its own dream up theories of how foreign
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`conduct might indeed be relevant to claims and defenses under U.S. or California law. But the
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`Court is concerned that the Court is the one dreaming up those theories of relevance. Epic’s
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`argument is that if an antitrust plaintiff says the words “global market” in the Complaint, then the
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`Court should forget that the Sherman Act and California law do not apply to foreign conduct not
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`directed at the U.S. Epic has not advanced any arguments that the particular foreign conduct at
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`issue in these RFPs actually is relevant to claims and defenses under U.S. law; Epic thinks it
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`doesn’t have to make that showing. In the adversarial system, we normally leave it to the litigants
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`to advocate for themselves rather than helping one side or the other. Here, where Epic has done
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`nothing more than gesture at a big pile of RFPs and say the word “global,” for the Court to
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`determine that foreign documents responsive to any particular RFP are relevant to claims and
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`defenses under U.S. domestic law would require the Court to write the motion to compel that Epic
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`didn’t write. That doesn’t seem like something the Court ought to do. And it would be grossly
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`unfair to Apple, which didn’t have an opportunity to respond to the arguments Epic didn’t make.
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`To be clear, the Court is not saying that each RFP had to be specifically discussed one by
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`one. It is common for litigants to group RFPs into related subjects and then discuss them in
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`groups. A common form of that argument is that RFPs 1-5 seek information about subjects A and
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`B; documents that are responsive will likely show X, Y or Z; and they are relevant to the
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`plaintiff’s claims for reasons 1, 2 and 3. And then the other side, having seen the moving party’s
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`arguments, can respond. Another popular approach is to use illustrative examples. In that
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`approach, the moving party selects a few RFPs that are representative of a number of issues in the
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`case, and the parties brief those examples. This allows the parties to obtain a ruling that they can
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`then apply to other RFPs without further judicial involvement. The Court’s experience is that a
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`well-constructed five-page discovery letter brief can effectively cover a lot of ground. But in any
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`event, the problem here is not that Epic’s discussion of why foreign documents responsive to any
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`particular RFP are relevant to claims or defenses under U.S. law was insufficiently detailed. The
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`problem is that Epic did not even attempt that showing.
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`Epic’s motion to compel Apple to produce documents concerning non-U.S. activities is
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`denied because Epic has not explained how the foreign documents responsive to these 70 RFPs are
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`relevant to the U.S. and California claims and defenses in this case.
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`B.
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`RFP 3
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`Epic’s RFP 3 seeks: “Documents sufficient to show actual and projected revenue, costs,
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`expenses, and profits, by country, by year, incurred by, earned by and/or attributed to, sales of
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`each of the following, respectively: (a) iPhone; (b) iPad; (c) iPod touch; (d) Apple Watch; and (e)
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`Apple AirPods.”
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`Epic argues that “Apple has market power in the market for mobile operating systems, and
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`that this market power in turn supports Apple’s market power in aftermarkets for app distribution
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`and in-app payment processing on iOS.” Epic explains that “[s]ustained, high profit margins
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`evidence market power. Apple’s revenue from iOS comes primarily from selling devices that run
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`iOS (iPhone, iPad and iPod touch) and accessories that depend on ownership of iOS devices
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`(Apple Watch and Apple AirPods).”
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`The Court agrees, and Apple does not dispute, that this financial information is relevant for
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`devices that access the App Store, since Epic alleges that Apple has market power in the
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`aftermarkets for app distribution and in-app payment processing on iOS. However, the Court is
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`unable to discern the relevance of this information for Apple Watch or AirPods, which are just
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`accessories to those devices. It is true that “the consistent extraction of supracompetitive profits
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`may be an indication of anticompetitive market power,” Bailey v. Allgas, Inc., 284 F.3d 1237,
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`1252 (9th Cir. 2002), but the way Epic describes the alleged markets in the Complaint does not
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`make it sound like Apple Watch or AirPods are in or access either market. The app distribution
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`market refers only to smartphones and tablets. Complaint ¶¶ 35-50. Paragraph 40 of the
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`Complaint, which is part of the description of the app distribution market, alleges that “for mobile
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`device users, there are effectively only two mobile operating systems to choose from: Google’s
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`Android OS or Apple’s iOS. As of July 2020, these two operating systems accounted for nearly
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`100% of the worldwide mobile OSs.” If the referenced “mobile devices” included wearables such
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`as Apple Watch, then paragraph 40 would be false because Garmin’s and Fitbit’s products do not
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`use Android OS or Apple’s iOS. Similarly, paragraph 183 alleges that “nearly 100% of all mobile
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`devices run either Apple’s iOS or Google’s Android OS.” That allegation would also be false if
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`“mobile devices” included wearables such as Apple Watch. Paragraphs 40 and 183 therefore
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`make clear that the “mobile devices” that access the app distribution market are limited to
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`smartphones and tablets. And the in-app payment processing market seems to refer to financial
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`transactions that occur within the app distribution market. See id. ¶ 109 (“There is a relevant
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`market for the processing of payments for the purchase of digital content, including in-game
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`content, that is consumed within iOS apps, the iOS In-App Payment Processing Market.”). Thus,
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`as pleaded, the mobile devices that access the alleged relevant markets are Apple’s smartphones
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`and tablets, not Apple Watch – an interpretation that Epic confirmed at the hearing. And, of
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`course, AirPods don’t access either market.
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`The most that can be said is that Apple Watch and AirPods are part of an ecosystem of
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`products that are designed to be used with iPhones and iPads, along with cases, chargers, speakers,
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`and so on. At this point we’re not talking about the relevant markets anymore (app distribution
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`and in-app payment), or even products that allegedly access the relevant markets (smartphones and
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`tablets); we’re talking about something that can be used with something that accesses a relevant
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`market. The sole theory of relevance that Epic cites in the letter brief is that the consistent
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`extraction of supracompetitive profits may be an indication of anticompetitive market power. But
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`if the Court ordered Apple to produce profit information for Apple Watch and AirPods, how
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`would Epic know if those profits were supracompetitive? Epic would have to subpoena Garmin,
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`Fitbit and others in the market for wearables for their profit information, as well as the major
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`players in the market for headphones – a sprawling and unjustified expansion of discovery into
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`two entirely new markets that, at the hearing, Epic said it had no intention of undertaking.
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`Epic’s theory of relevance seems to be that Apple makes a lot of money off of iPhone
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`accessories. That is surely true, but the distance between that fact and evidence of market power
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`in the app distribution and in-app purchase markets is too great for this discovery to be either
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`relevant or proportional. Ask yourself this: What if Apple’s profit margins on Apple Watch or
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`AirPods are similar to the profit margins earned by competitors in the wearables or headphone
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`markets? Then Apple’s profit margins on those products would seem to mean nothing.
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`Alternatively, if Apple’s profit margins on Apple Watch and AirPods are huge compared to its
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`competitors’ profit margins in those markets, then maybe those profit margins do mean something,
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`although we would still have to figure out what. This is one of those times where unless we burn
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`down the entire forest in discovery, we won’t know what meaning to attach to the information the
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`moving party is seeking. At the hearing Epic’s counsel acknowledged that this theory of relevance
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`would technically extend to every single iPhone accessory in existence, including cases, chargers
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`and speakers – as well as accessories to the accessories, such as wristbands for Apple Watch – but
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`said Epic was not asking for all that. However, the logical reach of this theory of relevance
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`underscores just how sweeping and disproportional it is. Discovery into the profit margins of
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`products this attenuated from the relevant markets is not proportional to the needs of the case.
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`Case 4:20-cv-05640-YGR Document 226 Filed 12/31/20 Page 8 of 9
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`Accordingly, the Court grants Epic’s motion in part and denies it in part and orders Apple
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`to produce documents responsive to RFP 33 for the iPhone, iPad and iPod touch.
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`C.
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`RFP 54
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`Epic’s RFP 5 seeks “Documents sufficient to show actual and projected revenue, costs,
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`expenses, investments (Including research and development) and profits, by year, incurred by,
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`earned by and/or attributed to, Apple’s IAP.”
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`This information seems relevant because it concerns Apple’s profits in one of the relevant
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`markets. Apple argues that “IAP is a functionality of the App Store, and not a separate product
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`that ‘earns’ or is ‘attributed’ any costs or revenue.” Apple also states that it “is working to
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`produce data underlying App Store P&L calculations. This will include data on the expenses and
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`revenues associated with the App Store generally. The documents Epic cites show only that
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`Apple tracks revenues from the App Store.”
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`Apple is losing credibility by continuing to assert that it does not have data in the teeth of
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`documents proving that it does. What’s more remarkable is how this is playing out. It’s not the
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`case that Apple makes an incautious statement to the Court and then the Plaintiffs rummage
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`through Apple’s document production to try to find a document that undermines Apple’s
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`representation. Rather, in both this and the prior filing, Apple denied the existence of information
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`in the very same joint discovery letter brief in which the opposing party cited by Bates number a
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`document proving that Apple does have the requested information. Here, Epic cited and has now
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`provided to the Court APL-APPSTORE_00227526-27, which indicates that Apple tracks the
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`revenue associated specifically with in-app purchases, and is not limited to determining what
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`revenue is associated with the App Store generally. At the hearing Apple stated that it has likely
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`produced hundreds of iterations of that email report. While the Court appreciates the clarification
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`Apple provided at the hearing, in the letter brief Apple should not have said that revenue is not
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`3 As to the worldwide reach of RFP 3, the Court’s analysis in section A applies. Epic has not
`explained why Apple should have to produce this information for every country in the world. The
`parties did not discuss whether Apple actually has this information for each country in the world.
`4 Epic refers to RFP 30 in its portion of the letter brief. However, neither side presents arguments
`concerning that RFP.
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`Case 4:20-cv-05640-YGR Document 226 Filed 12/31/20 Page 9 of 9
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`assigned or attributable to in-app purchases because Apple clearly does track that. Accordingly,
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`the Court orders Apple to produce this revenue information for in-app purchases for the relevant
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`timeframe.
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`As for everything else requested by RFP 5 (costs, expenses, investments and profits
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`associated with in-app purchases), the Court does not know if that exists or not. Apple says it
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`likely doesn’t. As to costs, Epic cites page 15 of the Fischer deposition, but in context that
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`testimony does not say that Apple is able to identify credit card fees that are specific to in-app
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`purchases as opposed to credit card fees more generally associated with the App Store.
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`Accordingly, for these items, the Court orders Apple to produce whatever it has.
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`IT IS SO ORDERED.
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`Dated: December 31, 2020
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`THOMAS S. HIXSON
`United States Magistrate Judge
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