European Commission hands down Statement of Objections against Microsoft's purchase of Activision Blizzard King: MLex

MLex reports that the European Commission has sent Microsoft a Statement of Objections (SO) over the acquisition of Activision Blizzard King (NASDAQ:ATVI). The MLex report also contains a quote from Microsoft, which is neither a confirmation nor a denial of the SO. I don't doubt what MLex says, so the SO has come down and the EC will probably confirm it soon.

The week before the SO, the European Commission's Executive Vice President Margrethe Vestager met with Sony's PlayStation chief Jim Ryan. Microsoft subsequently accused Sony of having lied to "people in Brussels" (which may or may not include the EC) about the parity aspect of the ten-year Call of Duty license it is offering.

The global set of Microsoft-ActivisionBlizzard merger review processes may be approaching an inflection point now in the positive sense of going around the final curve and entering into the home stretch. MLex found out earlier that the EC's Directorate General for Competition (DG COMP) and Microsoft are talking about what a clearance decision conditioned upon specific commitments could look like, but that an SO would come prior to a potential agreement that would be the EU equivalent of a U.S. consent decree. Similarly, the UK Competition & Markets Authority (CMA) will publish its provisional findings these days. Those were scheduled for late January or early February, and January is already over in the UK as I write this post. The EU SO and the UK provisional findings may just be necessary milestones.

Not long after MLex reported on the SO, Microsoft said in a U.S. court filing that the deal will not consummate before May 1 at the earliest, but no reference is made to the SO.

As long as the Commission and Microsoft haven't agreed, anything can happen, from unconditional clearance to conditional clearance all the way to a blocking decision that Microsoft would have to appeal to the EU General Court. But the situation in Europe may indeed be different from the state of affairs in the U.S., where at a recent hearing the Federal Trade Commission said there were no substantive settlement talks going on. And Bloomberg quoted a former U.S. antitrust official who claims that the FTC rushed to court in order to discourage the EC from striking an agreement with Microsoft. I can't verify that claim, nor is it wholly implausible. There was a time, though, when it would have been counterintuitive for the U.S. government to torpedo a U.S.-U.S. merger that strengthens the U.S. economy vis-à-vis large Asian rivals. Should that story be true, it would serve to show that the FTC will come under serious settlement pressure once the EU has approved the transaction.

The DG COMP-FTC difference in constructiveness is most likely attributable to different levels of risk aversion:

Some observers believe the FTC may not give a damn about losing in court, and may even consider it a sacrifice they just have to make in order to "reset" merger laws, though I have my doubts that such a strategy of running into surefire defeats will impress Congress all that much.

Not only the FTC but also the current DOJ never appears to get tired of losing. The FTC and DOJ's guiding principle these days--including this month's new United States et al. v. Google antitrust lawsuit, which is to some extent an "undo merger" case--reminds me of two quotes:

"The possible has been tried and failed. Now it's time to try the impossible."

"You have to try the impossible to achieve the possible."

By contrast, Mrs. Vestager, who is in charge of antitrust enforcement as well as digital industry policy, does not appear to have an appetite for losing. The sole exception may be the Apple-Ireland tax case, where she identified a real issue but tried to shoehorn it into state aid law, which the EUGC flatly rejected in a ruling that the European Court of Justice (ECJ) will probably affirm. The Apple tax case raised an issue that must be solved at the political level, and the "state aid" case served to draw attention to a structural problem that hasn't really been solved but at least Mrs. Vestager tried.

When it comes to merger, cartel, and unilateral conduct cases, however, Mrs. Vestager does not run into surefire defeats. For instance, after the EUGC reversed DG COMP's Qualcomm decision last year, the Commission refrained from appealing the case to the ECJ. When I saw the EUGC's Qualcomm decision, I also found it hard to see how the Commission could have raised a material question of law with the top EU court.

The Microsoft-ActivisionBlizzard SO, in and of itself, does not pose any risk to DG COMP's track record. What the Commission achieves this way are two things:

• DG COMP shows that the times of waving Big Tech's acquisitions through are over. This will discourage other such deals. Potential acquirers feel the strong headwinds. The shareholders of potential acquisition targets will prefer strategic alternatives that don't get delayed and potentially derailed by regulators.

• The Commission also demonstrates that it is not "softer" than the FTC and DOJ (and, potentially, the UK Competition & Markets Authority, whose comparable procedural milestone--called provisional findings--is also around the corner). Maybe more solution-oriented, but still pretty tough.

As I said in my post on the New Zealand Commerce Commission's postponement of its decision, a certain group of competition enforcers may now be trying to synchronize their proceedings. That doesn't mean to walk in complete lockstep, but to align schedules to some degree and to take similar procedural steps. Some other antitrust agencies, most recently Chile's FNE, have not had qualms over granting unconditional clearance to this transaction, which is the legally sound thing to do (and at least the Brazilian and Chilean decisions were definitely well-reasoned; in fact, they resembled what U.S. and EU competition authorities would have done five or ten years ago if presented with the same set of facts, and it's not the law that has changed, but politics).

There are no serious issues, so the SO is more of a statement than there can be serious objections:

• There will still be plenty of competition--as opposed to massive concentration--in the highly fragmented games business. And there will always be new major game makers of the kind no one even knows today.

• In the console market, Sony is and will remain the market leader. Merger reviews are not meant to cement someone's market leadership, but even if that were the name of the game, it wouldn't matter:

  • Most Call of Duty gamers would rather switch games than consoles if they had to, but they wouldn't have to because

    • Microsoft has no incentive for such a foreclosure strategy and, at any rate,

    • has offered Sony a ten-year license as everyone knows.

  • Even if--in an alternative universe--foreclosure occurred and everyone who plays CoD on a PlayStation today switched to the Xbox, Sony would still be the market leader (by far).

• The cloud gaming market is new. Some have entered, some are preparing to enter, some (such as Google, a company no third party could trust to really be committed to anything other than its search engine business and maybe its cloud platform) have left. In any event, the ten-year license offer includes subscription services.

• Windows is an open platform where anybody can offer anything. No app review like on the mobile platforms; no app tax.

• In light of the foregoing, no procompetitive justifications are needed, but there really is a procompetitive aspect here that I--as an app developer who formally complained to DG COMP and others over the Apple-Google duopoly's app distribution terms and policies--care about: Microsoft's plans for a universal (cross-platform) app store. In order for the European Union's Digital Markets Act (DMA) to make an actual impact on the market, it takes not only the law but also serious challenges to the Goopple duopoly. That's where apps like Candy Crush come in.

• The sole vocal complainer is Sony, and there are clear signs now of its reluctance to put all the facts (concerning its own content-centric strategy) on the table.

The facts being what they are, the question is not whether regulators can on a legally defensible basis object to the consummation of this transaction. It's only a question of whether or not a given regulator is happy to lose in court.

There was a time when U.S. policy makers, competition enforcers, academics, lawyers, and companies accused the EU of stretching the envelope of competition law. The EU now has the opportunity to become the first major jurisdiction to play hard but fair, to make a strong statement as it has with the SO, but to work it out. (Let me nuance "first major jurisdiction", though: as I made clear before, I have a lot of respect for the work done by Brazil's CADE and Chile's FNE on this matter, and believe they are rising stars in antitrust enforcement, but the U.S. is and historically will remain the cradle of antitrust enforcement, the EU often leads the way in digital market regulation, and the UK CMA has become very important as a result of Brexit.)

Share|

Microsoft offers commitment to U.S. court not to close Activision Blizzard merger before May, but seeks outright dismissal of so-called gamers' lawsuit anyway

On January 19, Microsoft stipulated during a U.S. court hearing (on its motion to stay the so-called gamers' lawsuit in the Northern District of California) that it would not consummate the acquisition of Activision Blizzard King (NASDAQ:ATVI) before March 31, 2023 at the earliest. Microsoft

• is now prepared to push back that earliest possible closing date to May 1, which would make it possible to hold the preliminary injunction hearing later and have more time for briefing the motion (currently the hearing is scheduled for March 23), but

• is primarily asking Judge Jacqueline Scott Corley to dismiss the private lawsuit in its entirety. The motion-to-dismiss hearing is requested for March 9, which means that the March 23 case management conference as well as the PI hearing may never have to be held in the first place.

  No particular reason is given. The court did not formally stay the case, but relied on Microsoft's stipulation when setting its initial schedule. Microsoft asks the court to adjudge its motion to dismiss regardless of any commitments not to close the deal before a given date.

Here's Microsoft's motion, filed late Tuesday afternoon Pacific Time:

De Martini et al. v. Microsoft (case no. 3:22-cv-8991-JSC, N.D. Cal.): Defendant Microsoft Corporation's Notice of Motion and Motion to Dismiss; Memorandum of Points and Authorities in Support Thereof

The May 1 date is found in a footnote toward the bottom of page 13 (page 19 of the PDF document).

Microsoft's motion presents three independent grounds for dismissal, the first one of which (failure to plausibly allege anticompetitive effects) has three parts. It would take just one of the other two grounds (unripe claims, lack of standing) for the court to hold that it lacks subject matter jurisdiction (lack of standing could not be cured, but if the claims were just deemed unripe at this point, the plaintiffs could refile at a later stage). Furthermore, Microsoft seeks dismissal of plaintiffs' prayer for injunctive relief--the only remedy the complaint is requesting at this stage.

Depending on what the court agrees or disagrees with, the outcome of this motion could range anywhere from a denial of the motion to a dismissal of the entire complaint with prejudice (meaning that it could not be refiled), with a variety of possibilities in between those binary results. For example, the court could also dismiss some theories of harm without prejudice (allowing plaintiffs to bring an amended complaint).

The Twombly standard applied by U.S. courts is that an antitrust complaint must not merely allege facts that, if taken as true, would support an actionable claim, but that such facts must also be plausible. I see Twombly motions in antitrust cases all the time, and at first sight Microsoft's Twombly arguments suggest to me that the class-action lawyers who brought that complaint prepared it rather hastily. They saw the FTC's in-house lawsuit and obtained some filings from other jurisdictions and tried to piggyback on the regulatory processes with their federal lawsuit. Microsoft's motion attacks (as it must) each of the different theories of harm separately:

• With respect to horizontal concentration (i.e., both Microsoft and Activision Blizzard make games), Microsoft rejects as "unsupported (and vastly incorrect)" the allegation of having a 23.9% market share "of some undefined market for game publishing" and Activision having a 10% market share.

• As for vertical foreclosure (Microsoft not making Activision Blizzard's games available to other console makers, subscription services etc.), Microsoft says the complaint has nothing to offer but a "highly speculative theory" and notes that if "[a]n allegation that a company might foreclose competitors' access to a product" sufficed, "almost any pleading would survive the pleading stage and proceed to expensive discovery."

• The motion says "only a few brief, conclusory statements" in the complaint relate to a theory of a lessening of competition in a video game labor market.

If the court finds the complaint lacking and wanting in one or more of those regards, it may allow plaintiffs to amend their complaint (dismissal without prejudice).

The motion notes that U.S. courts have previously dismissed private antisuit lawsuits against prospective mergers because they were unripe. In particular, Microsoft points to a Seventh Circuit decision in South Austin Coalition Community Council v. SBC Communications, Inc. and the adoption of that reasoning in this district (Northern District of California) in the 2011 AT&T Mobility LLC v. Bernardi decision. The interesting part there is that private litigation is premature when things are in flux. The regulatory reviews can lead to commitments (such as Microsoft's ten-year deal with Nintendo), and regulators can impose remedies. As a result, a case may go away in whole or in part. That fact has been key even in cases where only one regulatory approval was outstanding, and here there are merger reviews in multiple key jurisdictions (plus the FTC's in-house lawsuit).

The regulatory reviews come up again in connection with the first part of Microsoft's argument that those private plaintiffs lack standing. With respect to the alleged effects on a vieo game labor market, Microsoft notes that "[n]one of the Plaintiffs allege that they work in the video game industry or even plan to seek employment in the video game industry" and, therefore, they cannot claim that there would be "a concrete, particularized, and imminent harm to themselves."

The final part of the motion discusses why those plaintiffs are not entitled to an injunction. That one is not surprising at all. We will see it again when Microsoft files its opposition to the motion for a preliminary injunction, unless the court dismisses the complaint before that brief ever gets filed. In its motion to stay, Microsoft argued that the PI request was premature; in its motion to dismiss, it's about the key requirement that an injunction is available only when monetary relief (damages) would be inaquedate. The motion does not put it like that, but in the end it comes down to this: the worst-case scenario for those gamers is that they have to buy an Xbox in addition to a PlayStation, plus they would pay a little more for each game they buy (none of which makes sense, but that's the worst-case scenario even if one agreed with the theories found in the complaint).

In a hypothetical scenario in which the complaint survives the motion to dismiss in part, but at least the claim for injunctive relief is thrown out at this stage, the plaintiffs would have to bring a new complaint seeking damages.

In a couple of weeks we'll see the plaintiffs' opposition to this motion.

Share|

Nokia v. OPPO patent infringement case stayed by Munich I Regional Court pending Federal Patent Court decision on (in)validity

A spokeswoman for the Munich I Regional Court has confirmed that a Nokia v. OPPO patent infringement action (case no. 21 O 8880/21) has been stayed by the court's 21st Civil Chamber (Presiding Judge: Dr. Georg Werner) pending the parallel nullity proceeding in the Federal Patent Court. The opposition period at the EPO expired for this patent shortly before Nokia sued OPPO, so it had to be challenged by means of a nullity complaint.

The patent-in-suit is EP3396868 on a "method and apparatus for conveying antenna configuration information" and its validity appears to be in doubt.

In October 2021, I noticed that one of Nokia's Indonesian patents-in-suit is from the same family. That Indonesian case was dismissed by the lower court, and this month it became known that Indonesia's Supreme Court threw out Nokia's appeals.

The same European patent is also being asserted in The Hague as my Nokia-OPPO battlemap showed.

Furthermore, a Chinese patent from the same family has already been invalidated as the following screenshot shows (click on the image to enlarge):

If one counts two of Nokia's German patents-in-suit as one because they are from the same family, the current "score" is that

• 7 cases got stayed (most of them in Dusseldorf),

• 2 resulted in a finding of no infringement, and

• 4 led to injunctions.

Patent litigation is a "you win some, you lose some" business, and some of OPPO's countersuit patents are under invalidation pressure from Nokia. But Nokia is the one who started it, and seeks to be the net licensor. There is a Chinese FRAND rate-setting process underway, and the "hit rate" (of course, not counting non-standard-essential patents) may also be taken into consideration by the Chongqing court in its determination. It would not be an unreasonable assumption that Nokia picked patents for litigation purposes that it deemed particularly strong.

Nokia got better news on another front this month: the renewal of its patent license agreement with Samsung without litigation. But OPPO is not Samsung, and the question is whether Nokia is sufficiently flexible so the parties can finally come to an agreement. For now it seems they need more guidance from the courts.

Share|

Nvidia's outside counsel enters appearance in Federal Trade Commission's Microsoft-ActivisionBlizzard case

A new filing in connection has been made public by the Federal Trade Commission: two lawyers from the firm of Quinn Emanuel appeared on Nvidia's behalf (PDF) in the FTC's in-house lawsuit against Microsoft's acquisition of Activision Blizzard King (NASDAQ_ATVI). The attorneys gave notice of their appearance yesterday (Monday), but there is always some delay between actual filings and their publication by the FTC on its website.

I wrote in a January 18 post:

Nvidia is reportedly not against the deal per se. It appears to me they just want to opportunistically ensure that in the event others get a 10-year Call of Duty license (as Nintendo already has), they'll get one as well, though they don't have one now as far as I can see.

It's unclear whether those lawyers are going to try to support the FTC or whether the reason is just a discovery dispute. Nvidia's GeForce Now cloud gaming service is relevant as one of the FTC's theories is that Microsoft's ownership of Activision Blizzard King's title would adversely affect competition between cloud gaming services. Microsoft's Game Pass is already very popular, but it's a dynamic category and rumor has it that Netflix is interested in it, too.

Sony has been subpoenaed by Microsoft and may bring a motion to quash or limit the subpoena. The deadline for a potential motion is tomorrow (February 1), as I mentioned earlier today (Activision Blizzard points competition regulators to Sony's 'The Last of Us' blockbuster based on PlayStation-exclusive first-party game in merger context). It's possible that Nvidia has been subpoenaed at about the same time as Sony. If so, we may find out from their next filing.

Share|

Activision Blizzard points competition regulators to Sony's 'The Last of Us' blockbuster based on PlayStation-exclusive first-party game in merger context

Three days after Microsoft's communications lead called out Sony on misrepresenting the "parity" aspect of the ten-year Call of Duty license it has been offered, his counterpart at Activision Blizzard (NASDAQ:ATVI) has also tweeted some information that is relevant in the merger context:

The Last of Us is produced by Sony Pictures Television and PlayStation Productions.

It’s based on a best-selling video game developed by a Sony-owned studio and published by Sony as a PlayStation exclusive.

Why does this matter?

— Lulu Cheng Meservey (@lulumeservey) January 30, 2023

According to Wikipedia, The Last of Us premiered on television about two weeks ago and is based on the 2013 action adventure game. Its developer, Naughty Dog (formerly JAM Software), was founded in 1984 and acquired by Sony Computer Entertainment in 2001. The Last of Us is a PlayStation-exclusive game. Given that PlayStation maker Sony owns the studio that created The Last of Us, this is called a first-party title.

In the Federal Trade Commission's in-house adjudicative proceeding, Sony appears reluctant to provide documents and/or fact witnesses relating to its heavily content-centric strategy. But absent an agreement that allows the acquisition to be consummated, Sony will inevitably have to produce and testify. The FTC yesterday published a Friday order (PDF) by Chief Administrative Law Judge D. Michael Chappell granting Sony a generous extension until tomorrow (February 1) for a potential motion to quash or limit Microsoft's subpoena.

While I sharply disagree with Mrs. Meservey's categorization as "nonsense" of Epic's Section 1 claims concerning agreements between Google and various game makers including Activision Blizzard, she does have a point about the success of The Last of Us reflecting Sony's enormous cross-media market power. Many people who watch that TV series will get interested in the game, and it's available only for Sony's PlayStation, which is the market-leading video game console anyway.

Other games have also been "cinematized" and that includes Microsoft as well as Activision Blizzard titles. But Sony is a leader in a whole range of audiovisual media categories: games, movies, TV, and music. It can do this without even having to find, and share revenues with, partner companies in other industry segments. Mrs. Meservey is right that Sony "will be just fine without the FTC’s protection." And that applies not only to the FTC but also to other competition authorities.

The European Commission has to decide on a potential Statement of Objections (SO) this week or next based on my understanding of a Politico article, and the UK Competition & Markets Authority (CMA) announced is provisional findings for late January or early February.

Share|

U.S. states, Epic Games, Match Group remain concerned about November trial in Google Play Store antitrust case being impacted by Thanksgiving holiday

Late on Monday, the plaintiffs (36 state AGs, Epic Games, Match Group, and consumer class-action plaintiffs) and Google submitted a joint proposed schedule that would allow their antitrust litigation in the Northern District of California to go to trial in the fourth quarter:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-02981-JD, N.D. cal.): Joint Statement Re: Proposed Case Schedule and Trial Structure

The two sides managed to work out an agreement on a variety of pretrial deadlines, such as an April 20 deadline for dispositive and Daubert motions, and they are all fine with holding a final pretrial conference on October 19. But there are two case management questions on which the court will have to decide because the parties have different positions and interests.

The parties have sort of agreed that the jury trial will begin on November 6, 2023, but the plaintiffs "respectfully request the opportunity to discuss with the Court the impact of the Thanksgiving holiday on the trial and the possibility of an alteration of the trial date." Google opposes any trial date earlier than November 6 because of a potential conflict with the trial in the first United States et al. v. Google case in the District of Columbia (meanwhile the DOJ has brought a second federal complaint). But as Judge James Donato said at a December 16, 2021 hearing, he anticipates an approximately three-week trial. This means the trial--if it indeed starts on November 6--would be interrupted by Thanksgiving (November 23, 2023).

The plaintiffs were previously concerned about Thanksgiving potentially impacting jury deliberations. That concern was reasonable: while jury deliberations often conclude within a matter of days, it sometimes takes longer, especially in complex cases like this one. With the current schedule, the problem is not that the jury might rush to a verdict because of that holiday approaching, but the trial would have to be interrupted. Many Americans like to take the entire Thanksgiving week off. What will the district court do? If the trial starts on November 6, there are only two weeks before Thanksgiving week, meaning that everyone would have to return after Thanksgiving, listen to another week of testimony, and closing arguments, and then start deliberating.

The court will instruct jurors not to do their own research on the case, such as reading about it on the internet, and not to discuss the case with others. But if the trial is interrupted for a long weekend or a full week, and people spend a lot of time with their families, it's hard to imagine that there wouldn't be at least some violations of that rule. If any such violations become known, jurors have to be disqualified, and at some point there might not even be enough jury members left to render a verdict. It's a tricky situation.

If the trial started right after Thanksgiving, then there would be a conflict with Christmas in the event of protracted jury deliberations.

The trial would be shorter, however, if Google's breach-of-contract counterclaims against Match and Epic were severed from the antitrust case and tried separately. Google argues that "the resolution of the counterclaims will require the presentation of evidence, witnesses, and issues that duplicate the proof presented in the trial on Plaintiffs’ claims"--and that is a valid efficiency argument, though Google's motivation here is simply that it wants to portray Epic Games and Match Group as parties who breached a contract and thereby influence the jury's thinking on the antitrust issues. The plaintiffs have a point that "the claims are irrelevant and hence inadmissible as to States and Consumers and will consume precious time in the trial on core antitrust issues," which is why they will bring a motion to sever those counterclaims.

I regret to say that Google's efficiency-centric argument, while unrelated to Google's actual agenda, appears a lot stronger than the upcoming request for severing its counterclaims can possibly be.

It's unclear whether the trial can really be held before the end of the year. Unless the court simply sets a (much!) earlier trial date than November 6 and tells Google that any conflicts between the D.C. and California trials (such as overlapping witnesses) will be resolved as they arise, it may actually be better to hold a trial in January 2024 that won't be interrupted by a holiday around which people like to take an entire week off. I want the plaintiffs to prevail, and I want them to win as soon as possible in the interest of the app economy at large, but there are logistical issues.

Judge Donato will preside over the continuation of the Google Chat preservation hearing later today, and discuss case management with the parties on the same occasion. The plaintiffs have a strong case for discovery sanctions as I explained a few days ago.

Share|

Apple whistleblower Ashley Gjøvik makes headway in labor dispute: if NLRB's finding of violation of federal law is upheld, Apple will have to fix policies nationwide

Big Tech labor issues are increasingly becoming relevant to the competition cases I comment on. I'm not going to become an expert in that field anytime soon, but when there are major developments that have a bearing on my priority topics, I may mention them. In December, the Communications Workers of America (CWA) labor union called Apple out on its astroturfing, and the same CWA has repeatedly declared itself in favor of Microsoft's acquisition of Activision Blizzard (as is AFL-CIO).

Bloomberg's Josh Eidelson broke the news of a finding by a U.S. government agency, the National Labor Relations Board (NLRB), that two of ex-Apple employee Ashley Gjøvik's ("Demanding Reform at Apple Inc." website, LinkedIn profile, Twitter profile) complaints have been deemed meritorious. As a result, Region 21 (Southern California) will--according to a January 30, 2023 email I've seen--"issue a Complaint, absent settlement, alleging various violations of Section 8(a)(1) of the National Labor Relations Act regarding Apple rules/policies and various unlawful statements by Apple supervisors/managers." The case numbers for the "unfair labor practice charges" by Mrs. Gjøvik against Apple are 32-CA-284428 and 32-CA-284441.

Those "Apple supervisors/managers" include CEO Tim Cook, who in a September 2021 email wrote (as 9to5Mac has also reported) that "people who leak confidential information do not belong here" and that Apple was "doing everything in [its] power to identify those who leaked." That email was apparently provoked by a companywide internal discussion of sensitive topics such as pay equity and Texas' anti-abortion law. To be fair, it is Mr. Cook's duty as CEO to protect his company's secrets, and even though I take issue with some of his decisions (such as Apple's continued engagement in astroturfing), I don't think he knowingly and intentionally broke federal labor law. But he may have made the mistake of not distinguishing between leaks that are illegal (such as leaking Apple's source codes or customer data) and those that are perfectly above board, i.e., amount to legitimate whistleblowing.

Mrs. Gjøvik, who started following FOSS Patents on Twitter a while ago (and vice versa), has an interesting background. She's a lawyer by training (Santa Clara University and Oxford) and worked as a senior engineering proram manager at Apple, where she was in charge of pushing iOS updates, and previously in a similar role at Nike. Here's a YouTube interview with her that starts with what she was doing at Apple while things were going smoothly there:

In August 2021, The Verge reported that Apple had placed her "on indefinite administrative leave after she tweeted about sexism in the office." Apparently she took to Twitter only after exhausting all options to get certain issues addressed internally.

Two months later, Bloomberg reported on her complaint over Tim Cook's anti-leaking email.

In an email to reporters, Mrs. Gjøvik wrote that her NLRB charges "alleged Apple’s employee policies (including NDAs, a variety of policies posted on Apple’s intranet including about confidentiality & talking to the press, Apple’s Business Conduct policy, Apple’s surveillance policies, notices for departing employees, my employment contract, and an email sent to staff from Tim Cook in 2021) coercively silence Apple employees and chill them from engaging in protected activity through over-broad and vague terms, as well as through an implication of constant surveillance." To her knowledge, "this will be the first legal action taken against Apple by the US government about Apple’s employment processes at a national level."

Apple now has the opportunity to work out a settlement. Otherwise, the NLRB will start an adjudicative proceeding before an Administrative Law Judge (ALJ). Ultimately, Apple may have to change its policies nationwide, and there is no reason to assume that Mrs. Gjøvik will content herself with anything less than fundamental improvements that will benefit those still working at Apple (and who will be recruited by Apple in the future).

There is also a charge that she filed with the Securities Exchange Commission (SEC), alleging that in October 2021 and December 2022, Apple omitted the NLRB investigation (which has now given rise to a formal complaint) from shareholder letters and SEC filings. Furthermore, she has "alleged to the SEC that Apple’s employee policies likely violate Rule 21F-17 (prohibiting or chilling employees from reporting securities law violations to the SEC)."

Cases are also pending with the U.S. Department of Labor's Whistleblower Protection Program, in which she "alleges Apple retaliated against [her] for protected conduct and in violation of three separate federal statutes: SOX, CERCLA (Superfunds), and OSHA." The cases were docketed in December 2021 (which they wouldn't have been if facially meritless) and are now pending a final decision.

Through Freedom of Information Act (FOIA) requests, Mrs. Gjøvik found out that due to her complaints and disclosure, the U.S. Environmental Protection Agency (EPA) "required an onsite inspection of [her] Apple office in 2021 where they identified a number of open safety concerns & have requested corrective actions." Interestingly, "Apple was notified of the inspections a few days before [she] was suddenly placed on leave." Apple wanted the EPA to sign a non-disclosure agreement (NDA), but the EPA refused to do so.

Finally, there are some cases pending with the California Department of Labor, too.

The way I understand it, Mrs. Gjøvik opposes Apple's excessive secrecy. She alleges that "Apple has controlled and dominated over their workers through fear for nearly five decades" with a "Worldwide Loyalty Team" ensuring compliance and too many documents being designated as "Apple Confidential." Apparently, new employees are told that working at Apple is "like you work for the CIA."

Change may be coming now. Let's see whether the next step will be a settlement or, more likely, an ALJ ruling.

Share|

Indian startup association calls out 'Google's strategy to disincentivize ... alternative payment solutions' by making alternatives even more expensive on the bottom line

Reports on Google complying with the Competition Commission of India's Android decision(s) are greatly exaggerated. Let's do a reality check.

I don't mean to bash "the media" because I appreciate how hard it is for tech reporters to keep track of competition enforcement processes with the limited amount of time they can devote to a single topic. Also, I honestly believe many of them do a much better job reporting on those cases in a way that a horizontal audience understands than I (with my focus on a vertical audience) could.

But Google is playing games with the media. It announces "compliance" knowing that the average reporter won't have the time to figure things out before the news cycle is over.

Another issue is not Google's fault, though: there are actually two CCI Google cases that involve issues of relevance to app developers (one ruling came down in September 2022, the other--which affords app developers further protection against abuse--the following month), but too many of the reports I see talk about developments in one of those cases without clarifying the connection with the other (and stating clearly which of the two cases a report relates to, though it can be inferred from the amount of the fine if that one is stated).

In one of those two cases, the Supreme Court of India has allowed enforcement to begin, though Google's appeal will have to be resolved soon. I took the position that some of Google's concerns over having to change its Android business model in India while appealing the decision are not unfounded. Last week Google announced the following changes that it suggests bring it into compliance with the CCI decision(s):

"OEMs will be able to license individual Google apps for pre-installation on their devices.

"Android users have always been able to customize their devices to suit their preferences. Indian users will now have the option to choose their default search engine via a choice screen that will soon start to appear when a user sets up a new Android smartphone or tablet in India.

"We’re updating the Android compatibility requirements to introduce changes for partners to build non-compatible or forked variants.

"User choice billing will be available to all apps and games starting next month. Through user choice billing, developers can offer users the option to choose an alternative billing system alongside Google Play’s billing system when purchasing in-app digital content.

"Android has always supported the installation of apps from a variety of sources, including via sideloading, which involves app downloads directly from a developer’s website. We recently made changes to the Android installation flow and auto-updating capability for sideloaded apps and app stores while ensuring users understand the potential security risks."

That set of changes relates to both CCI decisions. For example, only the first ruling addressed pre-installation by OEMs, and only the second order addressed in-app payments.

At this point it is actually unclear whether any of the steps taken by Google in response ot the CCI's competition enforcement will put an end to Google's monopoly abuse. For example, a streamlined "sideloading" flow that still scares users out of installing such apps may not change much about the extent to which users install apps directly instead of from the Google Play Store.

Another deficiency was immediately clear to me, which is why I wrote the following on Twitter (please forgive the autocomplete mistake in that tweet: I meant "charges", not "charge"):

Startups are not going to benefit at this point: "User Choice Billing" doesn't mean more $$ in app developers' pockets. Google just charts the same commission as always minus what the third-party payment processors will charge. It will take more than that to bring about change. https://t.co/bykRJcTw4Y

— Florian Mueller (@FOSSpatents) January 25, 2023

I am glad to see that the Alliance of Digital India Foundation (ADIF) has meanwhile criticized Google's announcement the same way and in fact even goes beyond: ADIF says "[this] is nothing but Google’s strategy to disincentivize app developers from using alternative payment solutions by ensuring the app developers pay more for not using GPBS [the Google Play Billing System]." ADIF rightly points to the fact that ADIF addressed this by prohibiting Google from imposing any non-FRAND condition on app developers.

I've already criticized the User Choice Billing scheme on several occasions (the following is not even exhaustive):

• September 9, 2022: Google is fragmenting Android with country-by-country rules for third-party billing systems in response to regulation and legislation

• July 20, 2022: Google's new European in-app payment rules insufficient to comply with DMA: overt discrimination against game makers, excessive app tax imposed on everyone

• July 1, 2022: Apple, Google testing limits of Korean law on in-app payment systems by charging 26% commission that renders use of alternative payment systems unprofitable

• May 10, 2022: Google's rapid response to Match Group's U.S. antitrust complaint talks about User Choice Billing--but what is truly needed is Developer Choice

Also, I welcomed the fact that the Dutch Autoriteit Consument & Markt (ACM; Authority for Consumers & Markets) is trying to thwart a similar scheme by Apple.

India is a key market because Google has a 97% market share there, meaning one doesn't even need a single-brand market definition to find Google to have a superdominant market position.

In other Google Android antitrust news, three dozen state AGs, Epic Games, Match Group, and class-action plaintiffs have presented some smoking guns for Google's spoliation of evidence to Judge James Donato of the United States District Court for the Northern District of California.

Share|

Automakers' cellular patent licenses must be upgraded to 5G this year: Continental, FSA to argue with success (Avanci, Huawei) at Auto IP Summit in Munich

A few months ago, the Avanci patent pool announced that its 4G program had licensed most of the industry. This year, the world's car makers will have to upgrade their cellular standard-essential patent (SEP) licenses from 4G to 5G. Will that transition go smoothly? I think it should, but it's too early to tell.

In the first part of this post I'd like to draw your attention to an interesting automotive IP conference that will be held in Munich on March 1-2; subsequently I'll also share a few observations on IPlytics' efforts to market their services to the automotive sector in ways that may raise false hopes.

Auto IP & Legal World Summit (Munich, March 1-2, 2023)

Last April, conference organizer Ardensi held its Auto IP & Legal World Summit in Frankfurt, and it was a very interesting event in terms of attendees and content. This year's edition will take place in Munich on the first two days of March (click on the image to enlarge):

The conference covers a broad range of auto IP topics. The first part is about the ramifications of the Unified Patent Court (UPC), with speakers from industry players Thyssen Krupp and ABB, the EPO's Michael Froehlich (whom I remember from his days as Germany-based IP in-house counsel of BlackBerry), and two lawyers from well-known firms: Meissner Bolte's Philipp Rastemborski, who also spoke at last year's Auto IP Summit and now heads his firm's litigation practice, and Powell Gilbert's Rajvinder Jagdev, whose list of key cases is truly impressive.

A panel discussion FRAND litigation, negotiation, and dispute resolution promises some rather lively debate: Continental's Michael Schloegl ("Schlögl" in German) and the Fair Standard Alliance's Secretary General Evelina Kurgonaite will represent implementers in a debate with Avanci's Senior VP Laurie Fitzgerald and the head of Huawei's European IP department, Xiaowu (Emil) Zhang. As I wrote earlier this month, Huawei--which has recently signed up a number of car makers as licensees--has become an "accidental" net licensor, but remains a major implementer, too.

In a way, Conti and the FSA--represented at the conference by speakers who do not shy away from controversy--will have to argue with success: Avanci works. Huawei's licensing program works. But the FSA has members such as Apple and Continental who have a different vision for how they would like wireless SEP licensing to work.

One of Conti's key competitors, TomTom, will give a presentation on the changing licensing landscape.

Upon my request, the organizers provided the following short description:

The Annual Auto IP & Legal World Summit discusses the most pressing challenges faced by the global auto industry. Every year attendees from leading companies like Continental, VW, Bosch, BMW, Volvo, Mercedes Benz, Schaeffler and more gather to talk key issues, potential solutions surrounding IP risks, SEPs & FRAND negotiations, UPC, technology and more through panels, presentations and roundtable discussions. Join 100+ attendees and 30+ speakers from 01-02 March 2023 at the Hilton Munich City, Munich, Germany. Contact Vaishali on vaishali.popat@ardensi.com to get involved in the Summit.

IPlytics claims to speak for the automotive industry, favors complications over simple solutions

Patent database services are useful or certain purposes, but what I take issue with is when those offering them overstate the reliability of their results or the impact their tools can make.

A few days ago, IAM published an op-ed by IPlytics' founder, Auto industry demands a fresh SEP/FRAND focus in 2023. What does this mean? Has IPlytics become a lobbying front for the automotive industry? What mandate does Tim Pohlmann have to speak for an entire sector?

The automotive industry wants smooth and efficient solutions. But if things go too smoothly and efficiently, that industry may not have much of a need for patent analytics services. In that indirect sense, IPlytics definitely is an automotive stakeholder...

The previous day, IPlytics hosted a webinar, How to gain the competitive edge for V2X technology. Can a patent analytics firm really give innovators and implementers as "competitive edge"? You be the judge.

Back to the IAM op-ed. I disagree with the suggestion that something disruptive is needed: we're just talking about an upgrade from 4G to 5G. I also disagree with some specific statements.

Mr. Pohlmann says "[car makers' buying] power is so significant that most suppliers include indemnification provisions in their contracts." But in the Continental v. Avanci dispute (which ended last year when Conti finally stopped throwing good money after bad) Conti was unable to establish injury, and a key reason for that was that it couldn't point to any actual indemnification claim. Almost the entire automotive industry has the Avanci 4G license by now, but no indemnification claim by any of those licensees against any of their suppliers has become known to date.

The traditional allocation of liability in the automotive industry is indeed that suppliers are responsible. But by now that industry has accepted to take licenses at the end-product (i.e., car) level, which eliminates the need for indemnification clauses.

The following suggestion of a causation makes no sense to me:

"A battle of where to license in the value chain was fought in US courts between automotive supplier Continental, and Avanci and Nokia. Much of the heat dissipated from the dispute when Daimler opted to take a licence from Avanci."

Conti filed its U.S. complaint (in the Northern District of California, from where it was transferred at Avanci's request to the Northern District of Texas) in 2019. Daimler initially took a car-level license from Nokia, which was announced on June 1, 2021. But Continental's federal lawsuit had been dismissed (with prejudice) approximately nine months earlier: on September 10, 2020--and it took well over a year from that dismissal until Daimler took an Avanci license (December 2021).

A few months later, the Fifth Circuit affirmed the dismissal. My article on the initial panel opinion has since been nominated for the Antitrust Writing Awards by Concurrences and George Washington University.

The chronology of events renders IPlytics' theory implausible. If there was any causation, it was the opposite: the fact that Conti failed with its U.S. litigation may have persuaded not only Daimler but also other car makers that taking an Avanci license was a pragmatic choice.

After Daimler took not only the Nokia but ultimately also the Avanci license, Conti still brought two petitions for rehearing en banc with the Fifth Circuit. The only thing Conti did not try was to appeal the case further to the Supreme Court, presumably for lack of support from potential amici curiae who didn't deem such a weak case the right vehicle to push for an obligation to license SEPs at the component level.

No one stands to gain anything from fighting the lost war over component-level licensing again in connection with 5G, other than litigation firms and other service providers, such as IPlytics.

Share|

Sony caught lying, possibly to EU antitrust chief Margrethe Vestager: Microsoft makes clearest public statement yet on 'parity' aspects of ten-year Call of Duty offer

Under merger laws as they stand, Microsoft's purchase of Activision Blizzard King (NASDAQ:ATVI) falls far short of what a regulatory agency could block: there is no theory of harm to competition itself. Sony is capitalizing on some antitrust enforcers' purely political concern over one of the world's largest tech companies buying one of the world's leading game makers. And in doing so, Sony appears to be lying to regulators and/or the media. That's a serious accusation, but Microsoft made it in public a few hours ago: Microsoft's communications lead Frank X. Shaw wrote on Twitter that he "hear[d] Sony is briefing people in Brussels claiming Microsoft is unwilling to offer them parity for Call of Duty if [it] acquire[s] Activision." According to the Microsoft spokesman, "[n]othing could be further from the truth":

We’ve been clear we’ve offered Sony a 10 year deal to give them parity on timing, content, features, quality, playability, and any other aspect of the game.

We’ve also said we’re happy to make this enforceable through a contract, regulatory agreements, or other means.

2/4

— Frank X. Shaw (@fxshaw) January 28, 2023

That's really a clear-cut definition of parity that would be justiciable if ever necessary:

• timing,

• content,

• features,

• quality,

• playability, and

• any other aspect of the game.

I'm not totally surprised. In November I noticed an untruthful representation made by Sony in a UK filing: they said Microsoft was being investigated over its cloud software licensing practices, but no regulator has launched formal investigations (even if Sony had known something at the time that I didn't, by now it would certainly be public). There may or may not be investigations further down the road, but Sony claimed so just on the basis of someone having brought a complaint.

Mr. Shaw or his Brussels-based colleagues must have heard, directly or indirectly, from persons who were told by Sony that Call of Duty on the PlayStation might somehow be degraded--relative to CoD on the Xbox--when Microsoft is in charge. The word "people" indicates a plurality of persons, and that also makes sense because I believe Microsoft would not bring a public accusation of lying based on a single person's claim without having obtained corroborating information.

But what kind of "people" is Sony lying to?

It must be one or both of the following options:

• European Commmission EVP Margrethe Vestager, who had a meeting with Sony's PlayStation chief Jim Ryan on Wednesday according to Reuters; and/or

• Brussels-based journalists who cover tech competition cases.

The latter is more plausible than the former, but neither can be ruled out given that this revelation comes on the heels of that EC-Sony high-level meeting.

Journalists are more likely to confront Microsoft with what Sony said. There could have been conversations in which Microsoft told reporters that the deal was going to ensure total parity between the PlayStation and Xbox versions of Call of Duty, and then some journalists said "but Sony told us the opposite."

It isn't inconceivable, however, that what Sony said in the meeting with the EU's antitrust chief somehow leaked. More than ten years ago I had a meeting with one of Mrs. Vestager's predecessors at the Berlaymont (the EC's main building in Brussels) about another tech merger. The commissioner had one member of her cabinet and one of the two co-leads of the case team on her side of the table; we were also three. After the meeting, we talked to outside counsel for two other parties opposing the deal. Nothing leaked, but it was a small meeting and the fact that it took place wasn't reported in the media.

What weighs against the hypothesis of Sony having lied to Mrs. Vestager is that the Commission's Directorate General for Competition (DG COMP) presumably has a copy of the ten-year license offer in its case file. Anything Mr. Ryan said could be verified by just reading the proposed contract. However, Mrs. Vestager herself will probably not read an entire license agreement: she's in charge of competition enforcement and digital industry policy, and can't read each and every document from a merger case. So it's possible that Sony lied to her, hoping that even if the case team told her that the deal was clear on parity, some sliver of doubt would remain.

There can be no doubt that the ten-year license agreement came up during the Wednesday meeting. At this stage, where the European Commission was reported by MLex and others to be preparing a Statement of Objections (SO), Mr. Ryan was not going to give Mrs. Vestager a tutorial on what a video game console is. This is the stage where remedies matter (even if there is actually nothing to be remedied in the first place).

Here's the comment with which I shared the news of that meeting:

That's interesting. I wonder how EVP @Vestager views Sony's rejection of a 10-year Call of Duty license. Serious and reasonable complainants are interested in their concerns being addressed. https://t.co/3L9nojY0zH

— Florian Mueller (@FOSSpatents) January 26, 2023

It's interesting that the original prediction of the SO being handed down this week did not pan out. I have no doubt that when MLex reported it, it was indeed the Commission's internal schedule, though anything can always change before a formal decision is adopted.

Wednesday would have been the day for the vote: that is the day the College of Commissioners meets every week except during the European Parliament's Strasbourg plenary weeks (which this week wasn't). Instead of a vote on the SO, what happened was Mrs. Vestager's meeting with Sony. It might have been Sony's last chance to convince her that the commitments offered by Microsoft do not satisfactorily address the issue.

Another thing happened on Wednesday. Politico's Samuel Stolton reported, based on information from four unnamed sources, that DG COMP is "planning to open an antitrust probe into Microsoft over its video and messaging service Teams."

There is obviously no factual link between the merger and that unilateral-conduct topic. It's a coincidence that both topics are on the agenda at around the same time. But it could be that the Commission will simply make a rational and pragmatic decision about the Activision Blizzard deal while deciding to investigate Salesforce subsidiary Slack's Office-Teams tying allegations. Again, it would be a coincidence, but it would show that the Commission is not giving Microsoft any preferential treatment, just that the Activision Blizzard deal simply doesn't raise issues, especially not when a hard and fast ten-year license agreement can serve as a de facto structural remedy.

On Thursday, Bloomberg reported that, according to a former U.S. antitrust official, the FTC rushed to its in-house court in December with its Activision Blizzard complaint in order to discourage the EC from striking an agreement with Microsoft. I don't know whether this is true (the Capitol Forum disagrees), but it could be. There definitely are interdependencies between regulatory processes, as evidenced by what Microsoft's counsel said at the first hearing in the FTC case and indicated by the postponement announced by the Commerce Commission of New Zealand. But Washington doesn't remote-control Brussels.

Bloomberg reporter Nick Turner jokingly called this an "America first" policy: first in a chronological sense (first to file), but obviously not in a policy sense. Prior to Lina Khan becoming FTC chair, it would have been unthinkable for a U.S. government agency to pursue the objective of derailing a merger U.S.-U.S. merger that raises no legal issues, and to try to use foreign competition authorities for that purpose.

I doubt that Mrs. Vestager, her aides and her services (i.e., DG COMP) were amused when they heard of that Bloomberg article. The FTC-DG COMP phone call that the article references undoubtedly took place; even the Capitol Forum does not dispute that fact. But the notion of an FTC in-house lawsuit serving to influence the Commission's independent decision on whether certain merger commitments are more than good enough to facilitate clearance is a bit of an insult. I'm sure the Commission won't be influenced either way: neither will it engage in a race to the bottom in terms of who is prepared to ignore the applicable legal framework to a greater extent than their peers, nor do I think the Commission will grant clearance just to prove its independence after the Bloomberg article.

In my observation, some of the reports on the EC-Sony meeting implied that it was a win for Sony to get that audience. But the opposite is possible: it could be that the meeting was held to give Sony one last chance to show why a justiciable PlayStation-Xbox parity commitment for what is an eternity in this industry should not be accepted. Sony may have failed to make that showing, and then there might not even be an SO. We will find out soon.

In other Microsoft-ActivisionBlizzard news, Sony filed a new agreed (with Microsoft) motion for an extension of time (PDF) to bring a potential motion to quash or limit Microsoft's subpoena. Further to the first extension, the deadline would have been on Friday (January 27). It has now been pushed back further to Wednesday (February 1). All that we can conclude from this is that the parties are still talking, but that they apparently find it hard to reach an agreement. Sony may have more problems with the truth than most people would have thought. They must have something to hide.

Microsoft's Twitter thread about the nature of the ten-year offer and Sony lying about it creates an interesting situation. Sony either has to contradict--which could lead to further public discussion, possibly even the publication of the entire agreement (with or without some of the commercially relevant numbers redacted)--or, by remaining silent, Sony fails to dispute that it lied. What makes all of this even more serious is that potentially Mr. Ryan himself was lyin'. But who--other than a liar--would not refute that kind of allegation?

Share|

States, Epic Games, Match Group show smoking guns for Google's spoliation of evidence by moving sensitive talks to 'history off' chats: sanctions loom large

The Tuesday (January 31) hearing related to Google's auto-deletion of chats (as part of the Google Play Store Antitrust Litigation in the Northern District of California) is hardly going to be pretty for Google. I've commented on that sanctions process a few times, most recently on Wednesday (in that post you also find links to my previous articles on that issue), and sometimes it feels like I'm the only one to follow the process in granular detail. But once the court slaps Google with sanctions--which is quite a possibility now--the topic may draw considerably more attention.

Shortly before midnight local time on Friday, the two sides filed their responsive post-evidentiary-hearing briefs. You can find them at the end of this post.

The plaintiffs are going for the jugular by asking for punitive sanctions. But that doesn't mean they're wrong: it's a problem of Google's own making. I must say that some of the evidence referenced in and attached to their latest filing strongly suggests both that Google had a culpable state of mind and that the plaintiffs were indeed prejudiced. Should the plaintiffs' position be overreaching, than only to a gradual extent as far as I can see based on the evidence that has been put out in the open.

Google's argument comes down to saying that there are millions of documents--enough to build a case on--and that even if anything relevant was said in those Google-internal chats, it wouldn't add anything new. Well, with a view to both the "culpable state of mind" and extent-of-prejudice questions, there's some pretty damning evidence of Google systematically discussing sensitive issues in non-saved chats. This is evidence that Judge James Donato may not take lightly. It shows that Google just gives lip service to the preservation of evidence by pointing to its encouragement of using chat history or of saving key messages on email: as the plaintiffs note, it's just not realistic that busy managers will be able to make a determination on whether a chat is or is not relevant to a huge and complex case. The only solution is to save everything and have discovery attorneys take a look. But that's what Google wanted to prevent from happening:

• In a 2018 document, Google discussed "smart replies", meaning that a chat system proposes likely answers; for instance, if someone proposes a meeting, the system may offer such choices as "works for me". In that context, the assumption is stated that if the preservation of a chat's history is turned off, the content may be sensitive (click on the image to enlarge):

  

  "The assumption is that users often turn History off to discuss sensitive topics." And it's anybody's reasonable assumption that a Googler wouldn't have written this is if it wasn't Google's own policy. Indeed, Google's "Communicate with Care" guidelines for employees say that having off-the-record charts is "[b]etter than sending the email [about the same thing], but not without risk."

• The plaintiffs point to a hearing exhibit according to which there were Google-internal instructions that "anything sensitive" should be "move[d] to Chat/video call."

• Then there's a document in the evidentiary record where an employee deleted a passage from a Google executive's talking points (concerning some other gaming platform) and wrote:

  "Since it’s a sensitive topic, I prefer to discuss offline or over hangout." (Hangout was one of Google's chat systems, though it could also be used for screen sharing, voice calls, and video conferences.)

• My favorite smoking gun here is that a Google executive (Larry Yang, who was in charge of Fitbit at some point) made the specific distinction between saved and unsaved chats in connection with legal matters (click on the image to enlarge):

  

• What's similar in nature and even specifically related to Epic's lawsuit is a warning by one Google exec to his colleagues that on-the-record chats "remain in perpetuity" (click on the image to enlarge; I added the arrow that points to the critical passage):

  

It seems that Googlers don't always communicate with care about their company's Communicate with Care program...

My primary concern is that Google's "Project Hug"--an effort that resulted in various anticompetitive agreements with the likes of Activision Blizzard and Riot Games, ensuring their loyalty to the Google Play Store--is portrayed by Google as just some kind of customer loyalty program involving other services such as the Google Cloud Platform and YouTube, but I have no doubt that the driving motivation was to ensure all major mobile games but Fortnite would remain on the Google Play Store, and some of the automatically deleted chats probably contained smoking guns to that effect. And that's a key issue: Epic and Match amended their complaint (for Epic, it was even the second amendment) to allege a per se violation of Sherman Act Section 1 through those contracts.

Based on what has been put forward--which is only a subset of what the plaintiffs were able to present to Judge Donato--it seems to me that Google is guilty as charged.

Finally, the briefs with all of the (public) attachments:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Plaintiffs' Response to Google's Brief in Response to the Court's Minute Order Questions Regarding Preservation of Chat Messages

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Defendants' Reply to Plaintiffs' Responses to Minute Order Questions

Share|

36 states, Epic Games, Match Group allege Google had 'culpable state of mind' when auto-deleting relevant Google-internal chat messages: Google obviously denies

It's getting really serious now in the Google Chats discovery dispute that is part of the Google Play Store antitrust litigation in the Northern District of California (the plaintiffs are Epic Games, Match Group (Tinder), three dozen state AGs, and some consumer class-action plaintiffs). For a recap:

• 36 U.S. states, Epic Games, and consumer plaintiffs seek sanctions against Google for not preserving any relevant Google Chats: by default, all Google Chats are permanently deleted every 24 hours

• U.S. states, Epic Games, other plaintiffs reinforce motion for discovery sanctions against Google over systematic deletion of chats

• U.S. states, Epic Games, Match Group, consumers get evidentiary hearing over Google's systematic deletion of company-internal chats: Northern District of California, mid January

• Google faces two big U.S. antitrust trials in the fall; Epic Games, Match Group, state AGs suggest Google wants to push jury deliberations in Google Play Store case into Thanksgiving

The following screenshot shows the first part of the Google-internal policy at issue (Google Chat Retention Policy; click on the image to enlarge):

Judge James Donato approved the parties' proposed briefing schedule for the Google Chats discovery dispute. The two post-evidentiary-hearing briefs, answering specific questions about what to make of the evidence and what remedies to potentially impose, were due yesterday (Tuesday, January 24). By coincidence, that was the day the United States Department of Justice and eight state AGs filed a second Unite States et al. v. Google antitrust lawsuit (in that case, over ad tech), so some governmental plaintiffs dealt Google two blows on the same day.

Either side is allowed to file a response on Friday (January 27), and the next hearing over the issue will be held on Tuesday (January 31).

Given that there will be another round of briefing, it may be a bit early to predict the outcome, but I'll share my observations based on what I've read so far and what I infer from the court's case management decisions:

I doubt that Judge Donato will ultimately have no problems with Google's conduct. The company argues that it produced millions of documents and seeks to downplay the importance of what was not preserved, but it apparently can't deny the most important allegations the diverse group of plaintiffs has made.

It looks to me like this is now mostly about two questions:

• The Latin term for the first question--whether Google acted with a culpable state of mind--is mens rea, but this here is not a criminal case. The plaintiffs jointly (which is rather meaningful) take the firm position that Google did act with a culpable state of mind. It did mean to deprive the plaintiffs of relevant evidence. Google disputes this and suggests that it had other reasons for auto-deleting internal chats, and points to long-standing practice.

• If Google is held responsible, what should the consequences be?

  • The plaintiffs ask the court to instruct the jury that it's not going to see all the evidence that is relevant, and "should infer that Chat messages destroyed by Google would have been unfavorable to Google in this case."

  • Google says there wasn't really much prejudice (if any) to plaintiffs, and the remedy must be proportionate. It proposes--without actually submitting a specific wording--a "neutral" instruction. Google would then like to present evidence about the chat issue in hopes of persuading the jury that it acted diligently and correctly--and would then like to leave it to the jury to draw whatever conclusions from this mess.

There is no question that what the plaintiffs propose would substantially up the ante for Google in the jury trial in the fall. It's not like a "terminating sanction" that ends the debate: the jury is going to hear and see plenty of other evidence, and won't necessarily assume that the deleted chats prove everything wrong that Google says. But there are contexts in which an adverse inference instruction could tip the scales, such as the question of whether Google's "Project Hug" was about maintaining its Android app distribution monopoly through anticompetitive agreements with the likes of Activision Blizzard King. Some court filings related to Epic Games and Match Group's motion to amend the complaint referred to some evidence that "Project Hug" was about the Google Play Store more than anything else, and triggered by fear of Epic-style defections; I'll talk about that in another post one of these days. Now, if the jury additionally has to assume that Google executives may have said in internal chats that it was all about maintaining the Android app distribution monopoly, that would pave the way for a finding of a per se violation of Sherman Act Section 1. That's just one (but rather important) example.

Was Google's systematic deletion of chat messages so outrageous as to justify such punishment? Let's see what the responsive filings say before the weekend. In another disovery dispute (over a less problematic issue, though), Google came away unscathed in the District of Columbia last year.

I remember at least one mandamus petition by Google ahead of a major trial in the Northern District of California, and wouldn't be surprised if Google immediately appealed an adverse inference instruction to the Ninth Circuit (though appeals courts generally prefer to hear appeals of final judgments, which is why in 2020 the Federal Circuit rejected a mandamus petition over such sanctions), but we're not there yet.

Here are the two post-evidentiary-hearing briefs with all the (public) exhibits:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Plaintiffs' Responses to Minute Order Questions

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Defendants' Brief in Response to the Court's Questions Regarding Preservation of Chat Messages

Share|

DOJ and eight state AGs file antitrust lawsuit against Google, demanding divestiture of key ad tech assets

The United States Department of Justice has done today what media reports indicated yesterday: the DOJ, together with the attorneys general (AGs) of eight states (in alphabetical order: California, Colorado, Connecticut, New Jersey, New York, Rhode Island, Tennessee, and Virginia) filed an antitrust lawsuit over Google's ad tech. The key remedy sought by the governmental plaintiffs is this:

"Order the divestiture of, at minimum, the Google Ad Manager suite, including both Google’s publisher ad server, DFP, and Google’s ad exchange, AdX, along with any additional structural relief as needed to cure any anticompetitive harm"

At this stage, I just wanted to share the complaint, but it will take me some time to form an opinion. I've heard a lot of negative things about the ad tech sector in general, and an ongoing EU antitrust investigation into Google's ad tech may give rise to a Statement of Objections this year, but to pursue a break-up as a remedy is extremely--or in some people's opinion, exceedingly--ambitious.

The new complaint was filed in the Eastern District of Virginia (which is well-known in the patent litigation community for its "rocket docket"), while the 2020 United States et al. v. Google case over Google's search engine practices is pending in the District of Columbia.

United States et al. v. Google ad tech complaint (case no. 1:23-cv-108, E.D. Va.)

Share|