Only two weeks after I said that Apple was facing an "Epicsson" dilemma because of contradictory positions in connection with app distribution on the one hand (30% "app tax") and standard-essential patents (SEPs) on the other hand (spending only about 1-2% of its sales on patent licenses but complaining about "royalty stacking"), Apple has submitted to the United States International Trade Commission a public interest statement that says the following:
"In any event, none of Ericsson's licensees [smartphone makers like Samsung] can manufacture any 'like' product because none offer products with Apple's iOS operating system."
What Apple is telling the ITC there is this: even if patent infringements are identified, the iPhone can't be banned because it's a product category of its own. There's nothing else quite like it. Android smartphones may also be smartphones, but they are not iPhones, so they are not "like" articles (which would count as a potential replacement under the ITC's rules).
In the Epic Games v. Apple App Store antitrust case, however, Apple argued that there was a broad market for game distribution. So, according to Apple, if Fortnite wasn't available on the iPhone, who cares? It could still be played on an Xbox, a Windows PC, or a Samsung phone.
The district court didn't adopt that same market definition, but it did reject--as did Apple--Epic's single-brand market definition, according to which there is a foremarket (mobile operating systems) and an aftermarket (app distribution for the iPhone). Single-brand markets are a rare exception, but this is such a case.
Interestingly, when the question is whether iPhone imports could be excluded from the U.S. market (limited exclusion order, or colloquially "import ban"), Apple itself advances a single-brand market definition, claiming that the iPhone is a product category and Android phones are not capable of replacing any supply shortages or disruptions affecting the iPhone.
Apple's statement in that public interest statement is conclusory. Apple considers it a simple and undeniable truth that the iPhone is in a product category of its own. "Like articles" for the ITC's purposes means products that can substitute for a product that might be banned. The absence of further detail does not make Apple's position any more consistent. Apple wants to have its cake and eat it: when it's opportune, it says Android phones can't replace iPhones; but when Apple has to defend itself against antitrust allegations, it argues that users could just play a game like Fortnite on an Android phone.
The 35 state attorneys-general supporting Epic against Apple do not discuss Epic's proposed single-brand market definition (which I nevertheless consider the most important issue on appeal). The Electronic Frontier Foundation (whose amicus curiae brief I discussed in the same post as the state AG's filing) does advocate the single-brand market definition. And in its totally pro-Epic filing, the Biden Administration doesn't address the entire set of requirements for a single-brand market under Kodak/Newcal, but supports Epic with respect to the first step of that analysis, saying that even though iOS is not sold or licensed separately, there can be an operating system market. That position, too, is validated by what Apple just told the ITC: a phone with a different operating system is not an alternative product.
Apple is now a self-declared monopolist. Not a confessed abuser of a monopoly. But Apple has said that other smartphones are no substitutes for the iPhone--which goes beyond Epic's theory that Apple faces competition in the operating system foremarket but not the app distribution aftermarket. If Apple doesn't even face competition in the foremarket, the case is pretty simple. Now if only Apple could tell the same to all the regulators investigating App Store cases around the globe, or the courts in which Apple is facing antitrust litigation over its App Store practices (such as the United States Court of Appeals for the Ninth Circuit), that would save time and conserve resources--and the much-needed remedies (#OpentheAppStore) could be put in place sooner than otherwise.
Here's Apple's public interest statement (statements containing the same key passage were also filed in connection with two other Ericsson ITC complaints):
22-02-01 ITC-3595 Apple Pub... by Florian Mueller
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