FEDERAL COURT OF AUSTRALIA

Epic Games, Inc v Apple Inc (Notice to Produce) [2021] FCA 165

ORDERS

THE COURT ORDERS THAT:

1.    The Notice to Produce dated 28 January 2021 issued by the Applicants to the Respondents be set aside.

2.    Costs of the Respondents’ interlocutory application filed 9 February 2021 abide by the outcome of the Respondents’ interlocutory application filed 22 December 2020.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1    The Applicants (‘Epic’) have sued the Respondents (‘Apple’) alleging, inter alia, certain anti-competitive behaviour in Apple’s conduct of the Australian ‘App Store’ it maintains for devices operating its family of ‘iOS’ operating systems. In short, Apple removed Epic’s game Fortnite from the Australian App Store when Epic introduced its own in-app payment processing system for the iOS version of that game. This was contractually forbidden by the terms of the licence agreement between Apple and Epic. The consequence of that licence agreement was that users of the iOS version of Fortnite could only use Apple’s own in-app payment system. Epic says that the licence agreement and the removing by Apple of Fortnite from the App Store breached various provisions of Part IV of the Competition and Consumer Act 2010 (Cth) (‘the Act’). Part IV regulates restrictive trade practices. Epic puts its case on other bases too but these are not presently material. There are parallel proceedings in the United States before the United States District Court, Northern District of California. Apple’s response to Epic’s Australian suit has been to apply for a permanent stay of the Australian proceeding on two bases: (a) an exclusive jurisdiction clause in one of the agreements between Epic and Apple which requires litigation about the agreement to be conducted only in the courts of the Northern District of California; and (b) forum non conveniens considerations. Apple’s application for a permanent stay is to be heard by this Court on 23 March 2021.

2    In advance and for the purposes of that hearing, Epic has issued a notice to produce to Apple seeking certain documents. Apple has applied to set aside that notice to produce on two bases: (a) it does not seek material which is relevant to the issues which arise on its application for a permanent stay; and, (b) it is oppressive. Epic denies both propositions.

3    The question of what is relevant is a function of what Epic has foreshadowed it will say in response to Apple’s application for a permanent stay. It will make two submissions: first, a permanent stay ought not be imposed on a proceeding where there is a sufficient public interest requiring its determination within the Australian court system: see Comandate Marine Corp v Pan Australia Shipping Pty Ltd [2006] FCAFC 192; 157 FCR 45 at [200] per Allsop J. In this case, so Epic will argue, its allegations that Apple has contravened Part IV of the Act raise issues about the operation of Australian markets in which it has a commercial interest but also in which other Australian market participants have an interest. Secondly, there should be no stay on forum non conveniens grounds because its suit has a real and significant connection with Australia such that it cannot be said that the Federal Court of Australia is a clearly inappropriate forum.

4    Epic says that its notice to produce seeks documents which are relevant to both issues. The notice to produce seeks documents which, it may reasonably be surmised, will reveal the following information:

(a)    the number of Australian Apple ID accounts;

(b)    the number of apps available for download on the Australian App Store;

(c)    the number of such apps that use Apple’s In-App Purchase system (‘IAP’);

(d)    the number of apps downloaded in Australia over a 12 month period;

(e)    the number of transactions in Australia using IAP over a 12 month period;

(f)    the dollar value of transactions in Australia using IAP over a 12 month period; and

(g)    the number of Developer Agreements entered into with Australian persons.

5    The Respondent submitted that this information was not relevant to establishing the relationship between Apple and Epic. I do not agree. The question of whether there should be a stay on the grounds that the Federal Court of Australia is a clearly inappropriate forum will require some focus on the connections between Epic’s suit and Australia. Epic’s suit claims interference in Australia in the following asserted markets:

(1)    an ‘iOS App Distribution Market’, that is:

(a)    a global iOS App Distribution Market (in which Australia is included);

(b)    alternatively, an economically distinct sub-market of a wider (presumably global) market for the distribution of apps to users of smart mobile devices;

(c)    further alternatively, a distinct sub-market in Australia, geographically limited to Australia; or

(d)    further alternatively, a distinct sub-market in Australia, geographically limited to Australia and as an economically distinct sub-market of a wider market in Australia for the distribution of apps to users of smart mobile devices.

(2)    an ‘iOS In-App Payment Processing Market’, that is:

(a)    a global iOS In-App Payment Processing Market (in which Australia is included);

(b)    alternatively, a market the product dimension of which is limited to processing payments for in-app content for virtual gaming products within iOS-compatible apps;

(c)    further alternatively, a distinct sub-market in Australia, geographically limited to Australia;

(d)    further alternatively, a distinct sub-market in Australia, geographically limited to Australia and the product dimension of which is limited to processing payment for in-app content for virtual gaming products within iOS-compatible apps in Australia.

6    Unless Apple is going to concede for the purposes of the forum non conveniens application that the Court should proceed on the basis that these markets exist, it is legitimate for Epic to seek to demonstrate that it has a case that there are such markets. The information sought is relevant to that endeavour.

7    So far as the public policy exception is concerned, I accept – at least in principle – Apple’s contention that the information sought is unlikely to assist in the resolution of that debate. If the question were as simple as whether in relation to the operation of the iOS platform in Australia there is a public interest in the enforcement of Australian competition laws then it might be straightforward to say that there was. However, not all markets are the same and it is not difficult to imagine that for some markets, the public interest in the application of Part IV of the Act might be small. This might be so where the number of market participants is very small or where, for example, the market participants are located extra-territorially even though the market itself is located in Australia.

8    Consequently, unless Apple is willing to concede for the purpose of the application for the permanent stay that the markets in Australia alleged by Epic exist, then it must be open to Epic on the application to show that its case on the existence of those markets is sufficiently substantial. I therefore do not accept Apple’s contention that the information now sought is not relevant.

9    Moving then to the issue of oppression, Apple submits that, as framed, the notice to produce will place a considerable burden on it. To understand its point one must understand the terms of the notice which are as follows:

The Applicants require you to produce the following documents before the Court on 10 February 2021:

1.    Any document howsoever described evidencing the number of active Apple ID accounts associated with an iPhone or an iPad registered in Australia as at 19 January 2021, or a document howsoever described evidencing such matters as at the most recent date.

2.    Any document howsoever described evidencing the number of software applications (apps) available for download in Australia on the App Store as at 19 January 2021, or a document howsoever described evidencing such matters as at the most recent date.

3.    Any document howsoever described evidencing the number of apps available for download in Australia on the App Store as at 19 January 2021 that utilise Apple’s In-App Purchase (IAP), or a document howsoever described evidencing such matters as at the most recent date.

4.    Any document howsoever described evidencing the number of app downloads in Australia from the App Store between and including 19 January 2020 and 19 January 2021, or any document howsoever described evidencing the number of app downloads in Australia from the App Store over the most recent 12 month period.

5.    Any document howsoever described evidencing the number of transactions in Australia utilising IAP between and including 19 January 2020 and 19 January 2021, or any document howsoever described evidencing the number of transactions in Australia utilising IAP over the most recent 12 month period.

6.    Any document howsoever described evidencing the aggregate amount (AUD$) of transactions in Australia utilising IAP between and including 19 January 2020 and 19 January 2021, or any document howsoever described evidencing the aggregate amount (AUD$) of transactions in Australia utilising IAP over the most recent 12 month period.

7.    Any document howsoever described evidencing the number of Apple Developer Agreements entered into with persons who have registered using an Australian address as at 19 January 2021, or a document howsoever described evidencing such matters as at the most recent date.

“Document”, for the purposes of this Notice to Produce, has the meaning in the Evidence Act 1995 (Cth).

(Footnotes omitted)

10    This notice is a very blunt tool for obtaining the information which Epic seeks. It is true that Epic is not entitled to apply to the Court for an order that Apple provide written answers to interrogatories under r 21.01 of the Federal Court Rules 2011 (Cth) (‘FCR’) because the pleadings have not yet closed: FCR 21.02. However, the Court may dispense with the operation of that limitation in an appropriate case: FCR 1.35. I accept Apple’s submission that the notice, as framed, could require the production of a very considerable body of documentation. Although I agree with Epic that Apple’s evidence about the traumas Apple will now suffer if required to comply with the notice should perhaps be taken with a grain of salt, I accept Apple’s basic point that the work required to respond to the information which Epic seeks is quite disproportionate to what is actually being sought. For example, although paragraph 1 of the notice seeks really only to find out how many active Apple ID accounts there were for iOS devices in Australia on 19 January 2021, requiring Apple to produce every document it has which might reveal that fact resembles in its forensic precision the cheerful pastime of drift netting.

11    Epic apprehended that this might be a problem and in advance of the present debate articulated an alternate form of the notice. It will be sufficient to set out paragraph 1 of this notice:

The Applicants require you to produce the following documents before the Court on [x] February 2021:

1.    A document howsoever described evidencing the number of active Apple ID accounts associated with an iPhone or an iPad registered in Australia as at 19 January 2021, or a document howsoever described evidencing such matters as at the most recent date.

(Footnotes omitted)

12    This appears to be premised on the assumption that by substituting the word a for the word any the effect will be that the paragraph will be fully complied with if a single document is produced. I am not sure that is actually the effect of the substitution, but assuming in Epic’s favour that it might be, the notice then suffers from an irremediable problem in that it does not instruct its recipient which of the potentially many documents answering the description ‘a document’ is the lucky one which is to be produced. Epic, of course, would say that this is a matter for Apple but, generally speaking, the recipient of a notice to produce should not have to decide what is to be produced and what is not to be produced. This is an incident of the principle that the notice must identify with adequate specificity which documents the recipient is required to produce: Construction, Forestry, Mining and Energy Union (CFMEU) v BHP Coal Pty Ltd (No 3) [2012] FCA 61 at [6] per Collier J, citing Tony Azzi (Automobiles) Pty Limited v Volvo Car Australia Pty Limited [2006] NSWSC 283 at [20] per Brereton J and Sportsbet Pty Ltd v New South Wales (No 9) [2010] FCA 31.

13    I therefore accede to Apple’s application to set aside the notice to produce. However, if the matter cannot be resolved between the parties, I will entertain Epic’s application to administer corresponding interrogatories to Apple. The costs of the present application will abide by the outcome of the Respondents’ interlocutory application dated 22 December 2020.

Associate:

Dated:    2 March 2021