[00:00:00] Speaker 01: Our case for argument today is 21-2203, Blicks versus Apple. [00:00:07] Speaker 01: Please proceed. [00:00:12] Speaker 01: Which person are you? [00:00:14] Speaker 06: Your Honor, I am Thomas Burt. [00:00:17] Speaker 06: I was given to understand by the clerk immediately before this panel for the bench that though we had agreed to split argument, that argument will not be heard on the patent-specific issues. [00:00:27] Speaker 06: And rather, all the argument time will be [00:00:29] Speaker 06: I'd give it for the antitrust issues. [00:00:31] Speaker 01: That's correct. [00:00:32] Speaker 01: But for one procedural question. [00:00:34] Speaker 01: Judge Cunningham, the floor is yours. [00:00:36] Speaker 00: OK, yes. [00:00:36] Speaker 00: Do you agree that for the patent infringement claims, you are not appealing the district court's November 2020 order regarding the dismissal of claim 17? [00:00:48] Speaker 02: I think the... [00:00:52] Speaker 02: The decision's all addressed in validity, 101. [00:00:55] Speaker 02: So I think we're appealing the entire 101 issue. [00:00:58] Speaker 02: I don't think the court reached non-infringement. [00:01:00] Speaker 02: Did I misunderstand your question? [00:01:02] Speaker 00: Just looking at your notes of appeal, for example, you did not identify the order that related to claim 17. [00:01:09] Speaker 00: So my understanding is you are not appealing that particular order that relates to dismissal of claim 17 on 101. [00:01:18] Speaker 02: I think that's right. [00:01:18] Speaker 02: I think claim 17 is not being appealed. [00:01:21] Speaker 00: OK, thank you. [00:01:26] Speaker 06: Good afternoon, may it please the court. [00:01:29] Speaker 06: I'd like to reserve three minutes for it. [00:01:30] Speaker 01: Hold on a second. [00:01:31] Speaker 01: You've got to give him 15 minutes. [00:01:34] Speaker 06: Your Honor, for purposes of these proceedings, Apple has conceded that it has a monopoly in the mobile OS market. [00:01:42] Speaker 06: And so we turn next to the conduct [00:01:45] Speaker 03: And just so I understand, when you say mobile OS market, you're talking about the operating system that runs on these Apple iPhones. [00:01:55] Speaker 06: That is correct, Your Honor. [00:01:56] Speaker 03: And just so that there's no mis- And to be further clear, when it comes to your claim that they are illegally maintaining or preserving or protecting their monopoly, the monopoly that you are claiming is the operating system. [00:02:13] Speaker 03: Yes, Your Honor. [00:02:14] Speaker 03: Just like the Microsoft case from 20 years ago where Microsoft was found to be illegally protecting its Windows operating system. [00:02:24] Speaker 03: Yes, that is the argument, Your Honor. [00:02:27] Speaker 03: Okay, I just wanted to make sure it wasn't something broader, looser like the app market or [00:02:32] Speaker 03: Something called the Apple ecosystem. [00:02:35] Speaker 03: It's the operating system is the targeted monopoly. [00:02:38] Speaker 06: That's right And I expect as we discuss this Toronto I'm going to refer sometimes to the the Apple ecosystem because the Apple's market power in mobile OS gives it the ability to determine what is in and out of the app ecosystem and which apps can sell through the app store and all that but when we say that they are protecting [00:03:01] Speaker 06: by exclusionary conduct, they're a monopoly. [00:03:04] Speaker 06: We mean the monopoly and operating system. [00:03:08] Speaker 06: So what Blix alleges that Apple did is four things. [00:03:13] Speaker 06: Use its monopoly to force Blix to allow Apple access to its technology. [00:03:20] Speaker 01: This is the Sherlocking argument. [00:03:22] Speaker 06: This is the Sherlocking argument. [00:03:24] Speaker 06: That it took that technology, copied it, [00:03:28] Speaker 01: And do I understand your argument to be that the district court judge erred to the extent that he believed the Sherlocking argument was contingent upon the patent infringement claim? [00:03:38] Speaker 01: that Sherlocking has its own individual anti-competitive injury? [00:03:42] Speaker 06: Precisely so, Your Honor. [00:03:44] Speaker 06: They have different analytical lenses, and they don't have the same elements. [00:03:51] Speaker 06: And the fastest way I can put it, I think, is that anyone can infringe. [00:03:57] Speaker 06: A supplier can infringe. [00:03:59] Speaker 01: So I'm going to ask you, and you're not going to like this. [00:04:01] Speaker 01: But for purposes of this argument, I need to learn and understand the antitrust concepts. [00:04:06] Speaker 01: And that, to me, is the hard part. [00:04:08] Speaker 01: I want you to assume, for purposes of your argument today throughout, that there's no patent infringement because the patent is invalid. [00:04:14] Speaker 01: I'd like you to start from that assumption. [00:04:16] Speaker 01: It's not going to make you happy. [00:04:17] Speaker 01: But I still have reason to have lots of questions for you, regardless of whether there's patent infringement or not. [00:04:24] Speaker 01: So that's the way I want you to approach the argument. [00:04:26] Speaker 01: Is that OK? [00:04:27] Speaker 06: Yes, it is, Your Honor. [00:04:28] Speaker 06: And that is precisely where it is going. [00:04:33] Speaker 06: The Sherlocking is not dependent on the validity of the patent. [00:04:39] Speaker 06: If there's no patent, if there is a patent but the patent is invalid and therefore there's no patent, the Sherlocking turns on a different analysis. [00:04:49] Speaker 06: The analysis is, and that's where I was going with, anyone can infringe. [00:04:54] Speaker 06: Anyone can infringe. [00:04:56] Speaker 06: They don't have to be a competitor. [00:04:57] Speaker 06: They don't have to be a monopolist. [00:04:58] Speaker 06: What we allege is Sherlocking is inherently the act of a monopolist. [00:05:02] Speaker 06: Only a monopoly can Sherlock. [00:05:05] Speaker 01: Can you hold access to the platform while being able to reverse engineer whatever your app is and develop a competitive app so that kind of thing? [00:05:17] Speaker 01: Is that what you're talking about? [00:05:18] Speaker 06: Yes, but the way your honor's phrased it, I agree with all that, but the way your honor's phrased it makes it [00:05:23] Speaker 06: really specific to exactly this. [00:05:25] Speaker 06: And I can envision something that I would call Sherlocking that happens, for example, in manufacturing or pharmaceutical context, too. [00:05:32] Speaker 06: But it means that using the monopoly to control access and require the turning over of the technology, whether it's patented or not, but require the turning over of the technology. [00:05:43] Speaker 06: And then saying, OK, I'm going to now use this stuff and put it in the marketplace in a way that protects my monopoly. [00:05:52] Speaker 06: In other words, instead of expecting to have to defend my monopoly by continuing to have a better product, historical accident, better product efficiency, instead, I'm going to take this new thing that I've gotten hold of, and I'm going to use it to say, the changes that come with technology, I'm going to get ahead of that. [00:06:10] Speaker 01: So it's not just that they are committing an antitrust injury to blicks. [00:06:18] Speaker 01: in the form of withholding your ability to launch and therefore eliminating your first mover advantage. [00:06:24] Speaker 01: Your argument includes that they're also doing it for the purpose of protecting their OS monopoly because they want people to have to log on through their SIWA because it allows them to maintain monopoly power and expand sort of their [00:06:44] Speaker 01: people's commitment to their operating system. [00:06:47] Speaker 01: It also, if I'm understanding it right, prohibits developer access to the client base, which again, protects their monopoly. [00:06:57] Speaker 06: Chief Judge Moore? [00:06:58] Speaker 06: Yes. [00:06:59] Speaker 06: All of that I agree with, and this returns to Judge Chen you picked up on Microsoft earlier. [00:07:04] Speaker 03: Yeah, I'm trying to understand really the theory. [00:07:07] Speaker 03: I understand the theory of bad behavior by Apple, whether you call it Sherlocking or sandbagging or building a moat, whatever you want to call it. [00:07:17] Speaker 03: I understand that. [00:07:19] Speaker 03: Then I'm trying to understand how all of that relates back to protecting the maintenance of a monopoly in the operating system itself. [00:07:28] Speaker 03: And so what I couldn't tell from your briefing was whether your theory is everything that they're doing is in service of, at least in part, [00:07:41] Speaker 03: protecting Apple's operating system from rival operating systems from competing against Apple's operating system. [00:07:49] Speaker 03: Yes, Your Honor. [00:07:51] Speaker 03: And the things you were exploring with Chief Judge Moore about 40 seconds ago sounded like different kinds of possible monopolies other than the concern over the rise of rival operating systems. [00:08:09] Speaker 03: Can you clarify, because right now I'm lost and I need to be clear if I'm going to go your way. [00:08:18] Speaker 06: I think I can provide some clarity. [00:08:20] Speaker 06: The scenario that our pleading envisions is that if Apple were to allow [00:08:27] Speaker 06: of middleware to emerge like Java or Netscape in the Microsoft decision that flatten the difference between operating systems. [00:08:37] Speaker 06: There's another operating system currently on the competitor fringe that they managed to push down to 30 something percent in the United States that we all know and potentially new entrants. [00:08:48] Speaker 06: They're protecting their operating system against that. [00:08:52] Speaker 06: that if the changes in technology, if the release of SSOs that they couldn't act as an intermediary in, caused it to be so easy for users to cross-platform, that they can get to their streaming apps and their social media, all the other stuff that we log into these days, sort of without regard to what their operating system is, [00:09:15] Speaker 06: that that competitive fringe comes roaring back, and suddenly there's no more ability to drive a premium on the iPhone because their OS map, they can derive their monopoly profits in other ways, right? [00:09:28] Speaker 03: I understand you have an allegation, and I'm trying to understand, step through how you get from [00:09:35] Speaker 03: the lead shenanigans that are undertaken in this SSO market, and how that necessarily relates to ultimately protecting their operating system in the same way that Apple was trying to kill off Netscape in order to protect Windows. [00:09:51] Speaker 06: And that's what we mean by the discussion of middleware. [00:09:55] Speaker 06: that's similar to Microsoft. [00:09:58] Speaker 03: I understand middleware. [00:09:59] Speaker 03: I understand flattening the differences between operating systems. [00:10:02] Speaker 03: I understand that language, but I don't understand how your SSO, your blue mail messaging app, somehow is a vehicle to allow a rival operating system to rise up. [00:10:20] Speaker 06: Sure, Your Honor, because it [00:10:23] Speaker 06: Because nobody uses an operating system for the sake of using an operating system. [00:10:29] Speaker 06: Your Honor, people use operating systems because it allows them to use the applications they want to use, right? [00:10:35] Speaker 06: And increasingly what we do with these expensive computers in our pockets is that we use applications that once upon a time we used applications that existed on desktops and now much of what we use these computers in our pockets for is to access things that require sign-ons. [00:10:51] Speaker 06: And we're working off of applications that the applications, the environment we operate within, and we authenticate to them. [00:11:00] Speaker 06: If the difference now is between operating systems is that you've got an environment where your OS determines which apps you can interact with or how you interact with them. [00:11:16] Speaker 06: But the next generation is that largely your SSO is going to determine [00:11:21] Speaker 06: your interaction with the apps. [00:11:24] Speaker 06: It doesn't really matter what the OS is. [00:11:27] Speaker 01: OK, that's a lot of complexity. [00:11:28] Speaker 01: Can I ask a simpler question? [00:11:31] Speaker 01: Because I'll be honest, I didn't understand how that really answered your question. [00:11:35] Speaker 01: But maybe it does, and I just didn't understand it. [00:11:38] Speaker 01: I thought that, and maybe I'm wrong about this, but I thought that part of your allegation of how the shenanigans Judge Chen referred to [00:11:48] Speaker 01: really did protect Apple's monopoly in its OS was switching costs related. [00:11:54] Speaker 01: That really once people, like me, I love it when my computer autofills. [00:12:01] Speaker 01: You know what? [00:12:02] Speaker 01: In the government, they don't let you do that because they don't want your password saved. [00:12:05] Speaker 01: But at home, I love autofill. [00:12:07] Speaker 01: I love when I open up an app and my username and password are there. [00:12:11] Speaker 01: I'm not going to stop using that app because it's easier. [00:12:13] Speaker 01: And so it's like part of the switching costs, the culture of [00:12:17] Speaker 01: getting people in the door, having your service, and then they're not going to stop because your service is part of the big bundle. [00:12:27] Speaker 01: Am I understanding correctly that that's part of your argument about Apple's behavior and how it, at least at the 12b6 stage, causes anti-competitive monopolization for their operating system? [00:12:41] Speaker 06: One, Chief Judge Moore, yes. [00:12:43] Speaker 06: Two, everywhere we say moat, we're talking about switching costs. [00:12:48] Speaker 03: Switching costs of what though? [00:12:50] Speaker 03: I'm sorry. [00:12:51] Speaker 03: Are you talking about from an OS to an OS, or are you talking from an SSO to an SSO? [00:12:57] Speaker 03: Because those are two different things. [00:12:59] Speaker 06: Yes, they are, Your Honor. [00:13:00] Speaker 06: We mean from OS to OS. [00:13:02] Speaker 06: Here's what I mean. [00:13:03] Speaker 03: Because I understand Judge Moore's concern about once you're hooked into one SSO plan, why would you ever jump from one to the other? [00:13:12] Speaker 03: But that's not enough for your antitrust claim. [00:13:15] Speaker 03: You've got to explain to me why this connects all the way back to the underlying operating system. [00:13:21] Speaker 06: If I have a family of five and we've all got iPhones, the switching costs are, I may have a subscription of Bumble for $230 lifetime subscription, my kids are gamers, they may have spent [00:13:36] Speaker 06: $50 on this game, $50 on that game, downloadable content, and all the gameplay. [00:13:41] Speaker 06: And I may have social media apps with all of the saved messages that I have with my friend. [00:13:48] Speaker 06: All of those things, whether they are dollars or hours, all of those things are switching costs, not between SSOs. [00:13:55] Speaker 06: Your Honor, what we allege [00:13:57] Speaker 06: is that if my family of five decides that the next time we need to pick a new set of phones, we want to migrate to a different mobile operating system. [00:14:08] Speaker 06: We want to go get Google Android phones. [00:14:11] Speaker 06: But we have used sign in with Apple. [00:14:14] Speaker 06: We will find that much of what we have authenticated and signed up for, not that we have to go through more work to preserve those relationships, but that we will not be able to do so by any means short of individually going to the software help desk and praying that they will let us authenticate. [00:14:31] Speaker 00: If, for example, I've used sign on with Apple to... I've got to get a few questions in here because I've got a series of them for you here. [00:14:39] Speaker 00: Is signing with Apple a cross-platform SSO? [00:14:43] Speaker 00: You're going there with that argument right now, but I need to understand, is signing with Apple a cross-platform SSO? [00:14:49] Speaker 05: No, it is an SSO. [00:14:51] Speaker 05: The problem is that it is not a cross-platform SSO. [00:14:55] Speaker 01: Just so we say it in English, SIWA only works with Apple's operating system, not Android, and yours works with both, correct? [00:15:02] Speaker 06: In practice, that is what we plead. [00:15:04] Speaker 06: Yes, yes, Judge, Chief Judge Moore, that is willfully. [00:15:08] Speaker 00: Is Blitz's messaging bridge currently in SSO? [00:15:11] Speaker 00: I thought in your materials you seemed to imply that it might be in the future, but not currently. [00:15:15] Speaker 00: I need to understand where it stands now. [00:15:20] Speaker 06: Your Honor, the answer to that is that they have not rolled it out as a functioning SSO. [00:15:25] Speaker 06: They've rolled it out only as a male proxy so far. [00:15:32] Speaker 06: And that is because of the Sand in the Gears allegations. [00:15:36] Speaker 00: Now, in your operative complaint, do you allege that Apple took, via Sherlocking, or if you want to use these moat allegations, any technology other than blue mail? [00:15:48] Speaker 00: Tell me, is that an accurate statement? [00:15:49] Speaker 00: I just want to make sure I understand your allegations in the operative complaint. [00:15:53] Speaker 06: Your Honor, in the operative complaint, the allegation is that they took the messaging bridge, which was embodied in blue mail, but which is also the technology that would make a blix-based SSO work. [00:16:08] Speaker 00: And then how does that sort of taking specifically affect the OS market? [00:16:15] Speaker 00: Can you just kind of explain that to me? [00:16:17] Speaker 06: Taking that and making sure that it only goes out into the market in a way that does not foster cross-platform usage means that the OS is protected by high switching costs. [00:16:30] Speaker 06: If it were to go out into the market in a way that fostered cross-platform usage, it would lower switching costs. [00:16:41] Speaker 06: And I need to reserve what little time I have. [00:16:44] Speaker 01: We'll reserve your rebuttal. [00:16:47] Speaker 01: Thank you. [00:16:49] Speaker 01: You always look that way. [00:16:50] Speaker 01: Go ahead. [00:16:51] Speaker 01: Come on, Mr. Perry. [00:16:51] Speaker 03: Yeah. [00:16:53] Speaker 03: Let's just keep going. [00:16:54] Speaker 04: Thank you, Chief Judge Moore. [00:16:59] Speaker 04: May I please the court? [00:17:01] Speaker 04: Judge Cunningham. [00:17:03] Speaker 04: Apple's signing with Apple is a cross-platform SSO. [00:17:08] Speaker 04: The plaintiff pleaded that in paragraph 204 of the First Amendment Complaint, which is at appendix 148 to 49. [00:17:14] Speaker 04: They deleted that allegation from the Second Amendment Complaint, but it is no less true in the real world. [00:17:21] Speaker 04: Apple's signing with Apple works on Android. [00:17:23] Speaker 04: It works on iOS. [00:17:25] Speaker 04: It works on Windows. [00:17:25] Speaker 04: It works on Macs. [00:17:27] Speaker 04: Apple is encouraging cross-platform SSOs. [00:17:30] Speaker 04: Apple allows on iOS devices, sign in with Google, sign in with Microsoft, sign in with LinkedIn, sign on with Amazon. [00:17:37] Speaker 04: All the SSOs are permitted on iOS with the only condition that if the developer chooses to use an SSO, it must also offer sign in with Apple as an alternative. [00:17:47] Speaker 04: Judge Chen, then the question is, how does this, and by the way, Judge Cunningham, Blix has no SSO. [00:17:54] Speaker 04: has never developed one since his complaint was filed in 2018 has taken no steps to develop one. [00:17:58] Speaker 04: This goes to standing as well as to injury. [00:18:01] Speaker 04: And Apple has taken no steps to interfere with blue mail or messaging bridge on iOS. [00:18:07] Speaker 04: ever, with the exception of a six-week period where there was a debate whether the sign-in with Apple requirement applied to BlueMail or not. [00:18:15] Speaker 04: A debate that was decided in BlueMail's favor. [00:18:17] Speaker 04: Today, if you download BlueMail, you will find that they have sign-in with Google, and they do not have sign-in with Apple. [00:18:23] Speaker 04: They have never been required to use sign-in with Apple. [00:18:25] Speaker 04: They are not using it today. [00:18:27] Speaker 03: But there was a debate about whether they needed to also offer a sign-in. [00:18:31] Speaker 04: That's correct, Your Honor. [00:18:32] Speaker 04: And there was a debate, and there's an exception for email clients. [00:18:36] Speaker 04: The fifth exception in guideline 4.8 was determined to apply to blue mail. [00:18:40] Speaker 04: That's been resolved. [00:18:42] Speaker 04: It's not an antitrust claim. [00:18:43] Speaker 04: That's simply a routine developer dispute over the application of the guidelines. [00:18:49] Speaker 04: We're here in an antitrust case. [00:18:50] Speaker 01: Was there a period of time where they, I understand that they're not now being required to utilize SIWA. [00:18:59] Speaker 01: Was there a time where they were, where they did have to include it if they wanted another SSO? [00:19:04] Speaker 04: There was a period of time where an update was held up as the parties debated whether or not signing with Apple would be required. [00:19:13] Speaker 04: To my understanding, Blix never implemented sign-in with Apple. [00:19:16] Speaker 04: And today, the update has been implemented. [00:19:18] Speaker 04: Blue Mail remains available. [00:19:19] Speaker 01: But couldn't their antitrust injury include, at that point, being held off of the platform during the time when Apple was trying to impose, even though they ultimately decided not to impose that requirement on them? [00:19:35] Speaker 04: To be clear, Chief Judge, they were on the platform. [00:19:37] Speaker 04: This was an update to the existing app. [00:19:40] Speaker 04: The app was on the iOS platform. [00:19:43] Speaker 04: It has never been taken off. [00:19:45] Speaker 04: This was simply a question as to whether they could update [00:19:48] Speaker 04: And when updates are submitted for review, Apple applies the current guidelines to make sure that the entire app is in compliance. [00:19:54] Speaker 04: This dispute happened and was resolved in the ordinary course. [00:19:58] Speaker 04: The app was never taken off. [00:19:59] Speaker 04: Consumers were never disentitled or disabled. [00:20:02] Speaker 04: The developer was never disadvantaged. [00:20:04] Speaker 04: It simply was a routine disagreement about the application of the guidelines that Blix won. [00:20:09] Speaker 04: And again, that was two years ago. [00:20:11] Speaker 04: It was a period of six weeks. [00:20:13] Speaker 04: And it's not an anti-competitive injury. [00:20:17] Speaker 04: Judge Chan, you asked my friend how we get from sign-in with Apple, which is a single sign-on service, to the operating system market. [00:20:27] Speaker 04: The theory is middleware, as was acknowledged. [00:20:32] Speaker 04: And I have to reiterate, Blix has no middleware. [00:20:35] Speaker 04: If messaging bridge is the middleware, then Apple has not interfered with it in any way. [00:20:42] Speaker 04: If it is some hypothetical single sign-on that would use messaging bridge, [00:20:46] Speaker 04: Blix has not developed it. [00:20:48] Speaker 04: No other developer has developed it. [00:20:51] Speaker 04: No concrete steps have been taken towards this development. [00:20:54] Speaker 04: And therefore, there is no competition, no potential competition, no nascent competition under the Third Circuit's standing doctors. [00:21:02] Speaker 04: So there's a disconnect here. [00:21:04] Speaker 03: What about the argument that Apple's somehow altered the arc of the use of single sign-on by forcing all apps to include [00:21:22] Speaker 03: sign in with Apple as an option and you know because we're living inside an Apple ecosystem they are sort of gaming the system by entrenching [00:21:39] Speaker 03: themselves in an Apple-centric way for users to use Apple's single sign-on system. [00:21:48] Speaker 03: And then by doing so, you've further [00:21:54] Speaker 03: entrenched Apple users into the Apple world, making it that much less likely that they're going to switch over into a new different operating system. [00:22:04] Speaker 03: I think there's two theories. [00:22:06] Speaker 03: One is there will be a brand new operating system rival [00:22:10] Speaker 03: getting created thanks to these new single sign-ons. [00:22:14] Speaker 03: But then there's this other one I think is more of an entrenchment thing, making it harder and harder and less and less likely that anyone would ever entertain the idea of using a rival operating system. [00:22:26] Speaker 04: So I need to answer that in two steps, Judge Chen. [00:22:28] Speaker 04: The first is that Apple's initial conduct in the single sign-on market, [00:22:34] Speaker 04: There's still a disconnect to the mobile operating system market, but let's talk about single sign-on entrenchment. [00:22:38] Speaker 04: The first step is that it's undisputed that Apple has been inclusionary. [00:22:42] Speaker 04: Apple allows on the iOS platform all single sign-ons, including those offered by its operating system competitor, Android. [00:22:50] Speaker 04: non-operating system companies. [00:22:52] Speaker 03: Is it possible that's too superficial of a way of looking at the situation when we know we're already living inside of this Apple playing field and then by because there's this uneven playing field of the Apple ecosystem by forcing everyone to always offer an Apple option that just sort of bends the arc of what people are likely to do which is to [00:23:15] Speaker 03: choose the Apple one that Apple is forced on all app developers to make available. [00:23:20] Speaker 04: So we need to answer this from two sides, the consumer side of the platform. [00:23:25] Speaker 04: Blicks disavowed in the district court, and the district court found that there is no coercion, no forcing on the consumer side. [00:23:30] Speaker 04: So consumers have an option. [00:23:32] Speaker 04: In fact, consumers, because of this policy, have more options. [00:23:34] Speaker 04: That's pro-competitive, giving consumers more choices. [00:23:38] Speaker 04: If any single sign is offered, there are more of them. [00:23:41] Speaker 04: And that's out of the case. [00:23:41] Speaker 04: So the consumer side of the platform, there's no allegations of anti-competitive conduct, which goes to Chief Judge Moore's lock-in point, which I'd like to come back to. [00:23:49] Speaker 04: On the developer side of the platform, as Judge Stark explained at Appendix 26, [00:23:54] Speaker 04: Implementation of sign-in with Apple is entirely voluntary. [00:23:58] Speaker 04: You know, many apps, most apps probably, don't use any single sign-on. [00:24:01] Speaker 04: They use either no authentication method or an app-specific authentication method. [00:24:06] Speaker 04: It's only where those developers choose to use a single sign-on that the equal footing doctrine kicks in, right? [00:24:12] Speaker 04: That sign-in with Apple is offered alongside the others. [00:24:15] Speaker 04: Today I don't know your honor. [00:24:17] Speaker 04: It's an increasing number. [00:24:18] Speaker 04: This is a this is a novel and nascent market When this complaint was filed single sign-ons were barely known it is increasing over time These are big players as I said Google Amazon Microsoft LinkedIn Facebook [00:24:34] Speaker 03: we were to find that the district court had a misunderstanding of the Sherlocking allegation vis-a-vis the patent infringement allegation and incorrectly [00:24:51] Speaker 03: conflated the two. [00:24:53] Speaker 03: And then we concluded that the district court's finding of no anti-competitive, harmful actions was not really complete and correct because the analysis wasn't done properly. [00:25:12] Speaker 03: There's this other element of, OK, well, does any of this anti-competitive harm that's been alleged connect back to protecting a monopoly? [00:25:20] Speaker 03: That analysis didn't really happen either at the district court level. [00:25:24] Speaker 03: And so would this whole thing need to be remanded back for a second look? [00:25:30] Speaker 04: So if I could take those in reverse order, Judge Chen. [00:25:32] Speaker 04: The second question, is there any connection between the allegations of shenanigans, to use the court's word, [00:25:39] Speaker 04: exclusionary conduct in the mobile operating system market, which is this plaintiff's obligation. [00:25:44] Speaker 04: Having defined the relevant market, they have to show exclusionary conduct in that market. [00:25:49] Speaker 04: That's the Intergraph case. [00:25:50] Speaker 04: That's the Broadcom case. [00:25:51] Speaker 04: That's the Trinko case from the Supreme Court. [00:25:54] Speaker 04: And they have not. [00:25:54] Speaker 04: And Judge Stark did address this at Appendix 26, that there was no allegation connecting it. [00:26:07] Speaker 04: And in fact, if you look at the complaint, [00:26:09] Speaker 04: a section called harm to competition. [00:26:12] Speaker 04: It's paragraphs 277 to 318. [00:26:13] Speaker 04: In that entire section, there's only one paragraph, 282, that even refers to the mobile operating system market. [00:26:20] Speaker 04: And it's simply the entirely conclusory statement that competition in that market was harmed. [00:26:25] Speaker 04: There's no connection. [00:26:27] Speaker 03: Just to be clear, are you saying that the arguments we're hearing today as to the harm to the monopoly or the preservation of the monopoly [00:26:36] Speaker 03: We're all waived arguments, but they weren't made below? [00:26:38] Speaker 04: Your Honor, they have been making arguments that aren't supported by the allegations in their complaint. [00:26:43] Speaker 04: And you remember, they've had three opportunities to replede. [00:26:46] Speaker 04: They've had five sets of counsel. [00:26:48] Speaker 04: They've had different markets, different conduct, different theories. [00:26:51] Speaker 04: They've changed every time. [00:26:53] Speaker 04: This most recent one, they never synced up any allegation of exclusionary conduct in their newly minted mobile operating system market. [00:27:01] Speaker 04: And Judge Stark said, and this is a quote, [00:27:03] Speaker 04: Blix does not explain how Apple's requirement to offer sign-in with Apple restricts competition in the mobile operating system market. [00:27:10] Speaker 04: That's in Appendix 25 and 26. [00:27:13] Speaker 04: On appeal, they don't take on that statement. [00:27:15] Speaker 04: They don't explain why it's wrong. [00:27:16] Speaker 04: They don't point to anything in the complaint that has non-conclusory allegations of that. [00:27:20] Speaker 04: We have lots of attorney arguments and changing theories about [00:27:23] Speaker 04: middleware and flattening and so forth, but not concrete, specific factual allegations from which a finder of facts could find exclusionary conduct in that market. [00:27:32] Speaker 04: And we know, of course, from the Twombly case, which was an antitrust case, that you can't just plead the elements of an antitrust claim. [00:27:39] Speaker 04: You have to show facts. [00:27:40] Speaker 04: You have to plead facts that would allow a finder of fact to actually conclude that there was one. [00:27:44] Speaker 00: As to the Sherlocking... What about JA536? [00:27:48] Speaker 00: In terms of the second amended complaint, the operative complaint, do paragraphs 147, 149, 150, do those paragraphs do more of the link up that you're saying is lacking in what Blix has been describing to us? [00:28:05] Speaker 04: So Your Honor, those paragraphs are the theory. [00:28:07] Speaker 04: They are not allegations of facts. [00:28:11] Speaker 04: They are talking about hypothetical SSOs that this plaintiff has never developed. [00:28:17] Speaker 04: 147, for example, has an example, a hypothetical of a product that does not exist. [00:28:28] Speaker 04: This plaintiff may wish to create one, but they haven't. [00:28:31] Speaker 04: And we don't have antitrust cases based on vaporware, right? [00:28:35] Speaker 04: We don't have antitrust cases based on hypothetical products that nobody's developed. [00:28:40] Speaker 04: And there's no allegation of misconduct or conduct of any sort by Apple precluding the development of the product described in paragraph 147. [00:28:50] Speaker 04: As to paragraph 149, it goes to the switching cost question that Chief Judge Moore asked earlier. [00:28:55] Speaker 04: Switching costs are not monopoly maintenance. [00:29:00] Speaker 04: In other words, there is no doctrine of our law that says a brand [00:29:06] Speaker 04: may not encourage consumer loyalty. [00:29:08] Speaker 04: In fact, our law encourages consumer loyalty. [00:29:12] Speaker 04: If you look at soft drinks, or food, or computers, or anything else, brands are there. [00:29:19] Speaker 04: Trademarks are there to identify the brands. [00:29:21] Speaker 04: The brand's own products are there to encourage consumers to use them. [00:29:25] Speaker 04: And absent conduct that is exclusionary. [00:29:27] Speaker 04: And I have to keep coming back to this word, because this is what the Supreme Court, and this court, and the Third Circuit have told us is the standard. [00:29:33] Speaker 04: Absent conduct that's exclusionary [00:29:36] Speaker 04: Encouraging continued participation in the ecosystem is entirely lawful. [00:29:39] Speaker 01: But the exclusionary conduct that they allege in the complaint is that they're required, if they have any SSO, to include SIWA, and that that's the exclusionary conduct. [00:29:51] Speaker 04: And Your Honor, there's two problems with that. [00:29:53] Speaker 04: One, it is factually false. [00:29:54] Speaker 04: They are not required to. [00:29:56] Speaker 01: That's a Rule 11 problem, though. [00:29:57] Speaker 01: That's not something I can dispute with you. [00:29:59] Speaker 01: If the complaint alleges it at the 12b6 stage, what am I supposed to do? [00:30:03] Speaker 04: Your Honor, the complaint actually does never alleges [00:30:06] Speaker 04: it, Blix is required to use signing with Apple. [00:30:08] Speaker 04: The brief in this court says that, the complaint does not. [00:30:12] Speaker 04: There is a disconnect, as I said to Judge Jen, between the attorney arguments and the allegations of the complaint. [00:30:18] Speaker 04: Blix is not, and you can ask my friend, Blix is not required to use signing with Apple, and today does not use signing with Apple. [00:30:25] Speaker 04: So yes, that is one question. [00:30:27] Speaker 04: But Chief Judge Moore, let's spot the hypothetical. [00:30:31] Speaker 04: They were, and some developers are. [00:30:33] Speaker 04: If they choose to use any single sign-on service, then they must offer sign-in with Apple as an alternative. [00:30:41] Speaker 04: That's not an exclusionary requirement. [00:30:43] Speaker 04: That's an inclusionary requirement. [00:30:45] Speaker 04: That is requiring an additional consumer choice to be provided because, of course, Apple, as the platform operator, has to protect both the developer side of the platform and the consumer side of the platform. [00:30:56] Speaker 04: And if a developer comes in with sign-in with Google or sign-in with Microsoft, [00:31:00] Speaker 04: The consumers on the other side of the platform are largely loyal Apple consumers, and they would like to see sign in with Apple. [00:31:07] Speaker 04: They don't have to use it. [00:31:09] Speaker 04: They're entitled to pick Google or Microsoft if they want, if the developer offers it. [00:31:13] Speaker 04: But Apple, to protect its own consumers and its platform, has the sign in with Apple requirement as an alternative. [00:31:19] Speaker 04: And there's no antitrust doctrine that offering an additional choice to both developers and consumers is exclusionary or anti-competitive. [00:31:26] Speaker 01: So you're not offering the choice to developers if you require them to include it? [00:31:30] Speaker 04: Well, Your Honor, no developer is required to include it. [00:31:36] Speaker 04: Most developers do not use single sign-on at all. [00:31:40] Speaker 04: Only if they choose to use some single sign-on, and then it's their option as to how many, they can have one or 10, they have to include Apple as among the list of options. [00:31:50] Speaker 04: Again, it's not exclusionary. [00:31:51] Speaker 04: It's inclusionary. [00:31:52] Speaker 01: That's not the way the developer would see it, right? [00:31:56] Speaker 01: The developer is being forced to devote some portion of its web page [00:32:00] Speaker 01: and to have internal software engineers incorporate the Apple SIWA into its platform, isn't that the way the developer would see it? [00:32:10] Speaker 01: You may say, oh, it's an advantage to them to have the ability to have their customers access through us. [00:32:16] Speaker 01: But if they don't see it that way, that doesn't seem like inclusionary. [00:32:19] Speaker 01: It seems like exclusionary. [00:32:21] Speaker 04: Well, let's take, you know, Blix, for example, if they were required. [00:32:25] Speaker 04: They say in the complaint, paragraph 252, that they have chosen to use sign-in with Google and sign-in with Microsoft. [00:32:30] Speaker 04: So they have offered single sign-ons that give their customers over to other platforms. [00:32:37] Speaker 04: What they don't want to do is include Apple, even though they're accessing iOS and the Apple platform and the Apple customer base. [00:32:44] Speaker 04: There's no engineering involved. [00:32:46] Speaker 04: Signing with Apple is an API provided by Apple as part of the license agreement that all of us are part of. [00:32:51] Speaker 01: Is it your view that if they include sign on with Google or sign on with Facebook, that they must include sign on with Apple? [00:32:57] Speaker 04: Absolutely, Your Honor. [00:32:57] Speaker 04: That is the requirement. [00:32:59] Speaker 01: But that's exactly what they say is intended to extend the monopoly power in the operating system. [00:33:07] Speaker 04: And yes, that is the theory that they have tried to articulate. [00:33:11] Speaker 04: And we come back to the disconnect. [00:33:13] Speaker 04: There is no antitrust doctrine by which you could get to, let's say, every developer were required to include sign-in with that one. [00:33:20] Speaker 04: It's an extreme hypothetical. [00:33:22] Speaker 04: It doesn't exist today. [00:33:22] Speaker 04: But just think about it. [00:33:24] Speaker 04: How would that extend the monopoly in the operating system? [00:33:28] Speaker 04: The only theory that's been offered is through middleware. [00:33:31] Speaker 04: Single sign-ons are not middleware. [00:33:33] Speaker 04: By any definition, they are not middleware. [00:33:36] Speaker 04: They are simply conveniences for the user. [00:33:40] Speaker 04: There's no user compulsion alleged in this case. [00:33:42] Speaker 04: So it's only on the developer side. [00:33:44] Speaker 04: And the developers, if they choose to use the platform, they have to give up some of the requirements to go with it. [00:33:50] Speaker 04: That's not anti-competitive. [00:33:52] Speaker 04: That's part of the conditions on the license, which is hundreds of pages long and has all kinds of things in it. [00:33:57] Speaker 04: And so it's simply an additional option for consumers and developers that they're allowed to offer other developers. [00:34:05] Speaker 04: Not this developer, by the way. [00:34:06] Speaker 04: To reiterate, this developer doesn't use sign-in with Apple at all and is not required to. [00:34:11] Speaker 04: Which brings me to the question of standing. [00:34:13] Speaker 04: It actually brings me to my red light. [00:34:14] Speaker 04: Unless the court has it. [00:34:15] Speaker 00: I do want to ask about standing, though. [00:34:17] Speaker 00: So just following up on Judge Tin's question regarding the potential areas that the district court did not address in its opinion. [00:34:25] Speaker 00: He talked a little bit about the interplay between Sherlock and Pat infringement. [00:34:29] Speaker 00: And the question I have for you is, if we were to choose to vacate and remand, would it be possible for the district court to address standing in the first instance? [00:34:37] Speaker 00: Does this court, in your view, need to address standing? [00:34:39] Speaker 00: What's your take? [00:34:40] Speaker 04: So if I could answer that in two steps, Judge Cunningham. [00:34:43] Speaker 00: Yes. [00:34:44] Speaker 04: As to the Sherlocking question, Appendix 560, paragraph 249, the plaintiff alleges [00:34:50] Speaker 04: that Apple is free to offer signing with Apple so long as we don't infringe on Deluxe's intellectual property. [00:34:57] Speaker 04: That does away with the Sherlock and Glenn. [00:34:59] Speaker 04: Second, as to antitrust standing. [00:35:01] Speaker 04: Antitrust standing is a non-Article 3 prudential standing doctrine, so it's not required to be addressed at the outset of the case. [00:35:10] Speaker 04: It can be and often is addressed by appellate course in the first instance. [00:35:13] Speaker 04: We submitted the host [00:35:15] Speaker 04: international case from the Third Circuit recently that shows how it can be decided on the pleadings. [00:35:20] Speaker 04: The Third Circuit law is very clear on standing. [00:35:22] Speaker 04: If you are not a competitor or a consumer in the relevant market, you cannot sue. [00:35:27] Speaker 04: And BLIX is not a competitor or a consumer in the market for mobile operating systems. [00:35:32] Speaker 04: It doesn't offer a mobile operating system, and it disavowed being a consumer of a mobile operating system. [00:35:37] Speaker 03: There's the inter-extricably intertwined theme. [00:35:39] Speaker 04: There is the inextricably intertwined exception, which is very narrow, as the court knows, from the McCrady and Hanover Realty case, in which case the injury to the plaintiff has to be the very means by which the defendant carries out its allegedly illegal ends. [00:35:55] Speaker 04: That's the standard for inextricably intertwined. [00:35:57] Speaker 04: There is no injury to this plaintiff. [00:35:59] Speaker 04: There is no injury to this plaintiff. [00:36:00] Speaker 04: This plaintiff is not required to use sign-in with Apple. [00:36:03] Speaker 04: Therefore, the injury to the plaintiff is zero. [00:36:06] Speaker 04: It cannot be the means by which Apple has carried out the so-called monopoly maintenance. [00:36:10] Speaker 04: I mean, the whole thing is a house of cards. [00:36:14] Speaker 04: We agreed for purposes of the motion to dismiss to monopoly power in the relevant market for purposes of argument. [00:36:22] Speaker 04: It then became the plaintiff's burden to show injury, exclusionary conduct. [00:36:28] Speaker 04: We haven't talked about the tying claim, but it has additional problems there. [00:36:31] Speaker 04: in that market. [00:36:32] Speaker 04: And the real problem with this case, as Judge Stark recognized after giving good counsel multiple chances to amend, is there's simply nothing to link up the bits and bytes of complaints about Apple's blick-specific conduct with any cognizable theory of antitrust injury or exclusionary conduct or tying in the relevant market, the mobile operating systems market. [00:36:59] Speaker 01: OK, thank you. [00:37:00] Speaker 01: Any other questions? [00:37:02] Speaker 01: OK. [00:37:02] Speaker 01: Thank you, Mr. Perry. [00:37:04] Speaker 01: We gave Mr. Perry five extra minutes, so we'll give you five minutes as well for a bottle. [00:37:11] Speaker 03: Your blue mail app, it's not required by Apple for it to include signing with Apple. [00:37:17] Speaker 03: Is that right? [00:37:19] Speaker 06: The answer to that question is, Judge, as long as Blix remains just a messaging, just essentially an email plan. [00:37:26] Speaker 06: So for now, the answer is yes. [00:37:28] Speaker 06: For now, the answer is yes. [00:37:29] Speaker 03: Is it also true that Blix doesn't offer a single sign-on service? [00:37:36] Speaker 06: The answer is yes, and Your Honor, I'd refer the court to it. [00:37:38] Speaker 03: Has it ever offered a single sign-on service? [00:37:42] Speaker 06: The answer is no, asterisk. [00:37:45] Speaker 06: Your Honor, I would ask the court to take a look at paragraphs 177 through 184. [00:37:54] Speaker 06: This messaging bridge is deployable as a single sign-on and would be a revenue producing source for Blix, but they have not been able to launch it. [00:38:05] Speaker 06: And that's the sand in the gears allegations and the leg up that Siwa has signed in with Apple. [00:38:12] Speaker 03: You're saying that they have the capacity to create a single sign-on, but they haven't yet created a single sign-on? [00:38:19] Speaker 06: I'm saying they've essentially got the product built and have not been able to put it out in the marketplace for that reason. [00:38:25] Speaker 06: Because at the time when they would have needed to launch to be commercially viable, Apple made sure that their limited resources were taken up with other things by attacking their already on the market product, their mail client. [00:38:45] Speaker 06: Which paragraph is this? [00:38:48] Speaker 06: So I referred the court to 177, the deploying the messaging bridge as a revenue source, and the send in the gear section, which details the conduct that kept what's off balance. [00:39:05] Speaker 03: I just want to know the statement of, we don't have an SSO because Apple stopped us from being able to launch an SSO. [00:39:14] Speaker 01: Paragraph 196. [00:39:16] Speaker 03: Thank you, Your Honor. [00:39:19] Speaker 06: 196 and 225, that the sand in the gears shifted Blix's focus at a critical time. [00:39:27] Speaker 00: Did you put it in the market in Android? [00:39:31] Speaker 06: No. [00:39:32] Speaker 06: Android has been pushed to the competitor fringe, and the answer to that is, your honor, no. [00:39:39] Speaker 03: Do you have a better paragraph than 196? [00:39:44] Speaker 06: Well, the sand in the gears that [00:39:47] Speaker 06: stop them from being able to move at the critical time is at 2.25. [00:39:51] Speaker 06: 2.25, OK. [00:39:56] Speaker 00: What is your response on the standing issue? [00:39:59] Speaker 06: Your honor, my friend refers to the third circuit exception for inextricably intertwined as very narrow, but I think it falls fairly within what 3201 Hanover contemplates. [00:40:13] Speaker 06: The preventing this specific technology from getting a foothold in the SSO market in the way that [00:40:21] Speaker 06: in the way that, to refer back to Microsoft, that Microsoft needed to prevent the widespread adoption of a cross-platform Java or of Netscape. [00:40:31] Speaker 06: They didn't have to wipe it out entirely, but they had to prevent it from becoming widely used. [00:40:37] Speaker 06: Right? [00:40:37] Speaker 06: By preventing this technology from being widely used as a single sign-on that would disintermediate Apple and foster cross-platform, essentially so you could just port all your relationships when you switched from Apple to either a current or future other operating system. [00:40:58] Speaker 06: That the inextricable means by which they did that was to stuff blicks when it tried to get this into the market. [00:41:05] Speaker 06: That's the allegation. [00:41:10] Speaker 06: And we do plead that it's a revenue-producing technology that they haven't been able to get out the door. [00:41:17] Speaker 01: Anything further, counsel? [00:41:18] Speaker 06: Nothing further, Your Honor. [00:41:20] Speaker 01: OK, we thank both counsels. [00:41:21] Speaker 01: The case is taken to the Senate. [00:41:22] Speaker 06: Thank you for your time.