Live blog: Apple CEO Tim Cook testifies in Epic legal battle

Apple CEO Tim Cook is rounding out a trio of senior-level executive testimonies in the ongoing legal battle with Epic Games. Following testimonies from Phil Schiller and Craig Federighi, Cook is taking the stand this morning. Read on as we live blog Cook’s testimony as it happens.

Apple has promised that Tim Cook will testify for one hour for examination with Apple lawyers and face 30 minutes of cross examination from Epic lawyers. The company says that Cook’s testimony will focus on: Apple’s corporate values; Apple’s business and operations; development and launch of the App Store; competition faced by Apple.

Cook’s testimony follows appearances from Phil Schiller and Craig Federighi. Schiller’s testimony focused on the early days of the App Store, how Apple enforces its App Store guidelines, and other similar topics. Federighi focused on security, underscoring how the App Store helps protect iPhone and iPad users.

• Craig Federighi says the Mac has an ‘unacceptable’ malware problem
• Phil Schiller testifies as Apple begins to present its case in Epic lawsuit
• Phil Schiller reveals $50M cost for WWDC, App Store Small Business Program details, more
• Craig Federighi begins testifying in Apple vs. Epic case, focuses on iPhone security

Live Blog: Tim Cook’s testimony

Refresh for more, newest updates will be added to the top of the bulleted list below…

• Now the court is moving into a sealed session to discuss confidential documents. We’ll update this post if public record begins again.
• Are developers allowed to sell to consumers outside the App Store? “Yes,” Cook says. Can they be cheaper? “Yes,” Cook says. Are developers allowed to communicate with users about these lower-cost options? “Yes,” Cook says. Cook adds that game developers benefit greatly from Apple IP.
• Apple’s counsel Veronica S. Moye of GIbson Dunn is back for re-direct.
• “I view it differently than you do. We’re creating the entire amount of commerce on the store, and we’re doing that by focusing on getting the largest audience there, we do that with a lot of free apps so those bring a lot to the table,” says Cook.

• “I understand this notion that somehow Apple’s bringing the customer to the gamers, to users. But after that first time, after that first interaction, the developers of the games are keeping their customers. Apple’s just profiting off that, it seems to me,” the judge says.
• Judge YGR asks Cook about a survey that showed 39% of developers are unhappy with Apple. Cook says that Apple “turns the place upside down” for developers. He notes there is “friction” because Apple rejects 40% of apps per week.
• “We are creating the entire amount of commerce on the store and we are doing that by getting the largest audience there,” Cook says. “I think competition is great. We have fierce competition.”
• Judge YGR says competition didn’t prompt the App Store Small Business, concerns about antitrust regulation did. Cook says COVID prompted the change, and a feeling that Apple should do something to help small businesses. Cook notes Google announced a similar program after Apple.
• Why can’t developers at least link out to their own websites for purchases? “If we allowed people to link out like that, we would in essence give up our total return on our IP,” Cook said.
• “The gaming industry seems to be generating a disproportionate amount of money relative to the IP you have given them, and everyone else. In effect its almost as if they’re subsidizing everyone else,” the judge says. “You’re charging the gamers to subsidize Wells Fargo.”
• Judge YGR says that the gaming industry is “almost subsidizing everybody else.” Cook says Apple has to monetize its intellectual property. YGR says part of the issue is impulse based purchases.
• Judge YGR asks Cook about his statement that Apple wants to give users a choice. Why not a choice for a cheaper option for content? Cook says that customers have a choice between iOS and Android.
• Judge YGR asks Cook about the extent of his knowledge regarding the Japan legal change that prompted the addition to the App Store agreement. Cook said he simply knows that Apple had to make the change to comply.
• Cook faces questioning from Judge YGR
• Apple’s lawyer asks Cook about App Store profit and loss.
• Apple’s counsel Veronica S. Moye of GIbson Dunn is back for re-direct.
• Tim Cook says he doesn’t know Philip Shoemaker, head of App Review for 6 years, but is familiar with the name.
• Epic’s lawyer asks about Cook’s remembrance
• Cook says that the Google search deal is included in a section on a financial report called “licensing.”
• Cook continues to say he does not know details about profitability analysis.
• Epic’s counsel Gary Bornstein is back for more re-cross
• Cook says that he receives messages of support from developers. Apple’s lawyer specifically tries to mention a news article from today related to Snapchat, but it is dismissed as hearsay.
• Cook says that Apple does not have the option to “defy Chinese law.” He adds that Apple takes all the same consumer protection measures in China as it takes elsewhere, such as App Tracking Transparency.
• Cook elaborates on allowing Fortnite back in the App Store, saying it is in the best interest of the user, but only if Epic stops being “malicious.”
• Apple’s lawyer asks Cook about App Store profitability and if Epic’s expert, Ned Barnes, and whether he or Barnes would be more truthful more about the topic. “I am, I was in the meeting,” Cook said.
• Moving on to search engines, Cook says that Apple has agreements with other search engines beyond Google that also provide revenue.
• Apple’s lawyer asks Cook about a legal change in Japan that prompted the addition to the developer program agreement about withholding revenue.
• Apple’s lawyer asks Cook about App Store search ads, allowing Cook to explain other discoverability features in the App Store.
• Apple’s counsel Veronica S. Moye of GIbson Dunn is back for re-direct.
• Epic’s lawyer says his remaining questions for Cook must be asked in a sealed session.
• Epic is showing Tim Cook an email from 2009 about an app that was using a “store within the app,” predating the official launch of the In-App Purchase system. We’re looking at multiple examples of this. Epic’s goal is to show that Apple expanded its App Store rules to take more commission from apps with the In-App Purchases.
• “I think it would be a lot safer if we did it the other way,” Cook says. “Today not all apps are on the store, so there might be a user benefit to having access to something not on the store.”
• Now we’re back to the Mac vs iPhone argument. “The Mac and iPhone are very different,” Cook says.
• Cook says that Apple must comply with government regulations in the jurisdictions in which it operates.
• Bit of a discussion about moving some of this conversation to sealed session as some of the information is highly confidential.
• Epic’s lawyer asks Cook about iCloud data in China being stored on state-owned GBCD servers. He says Apple has taken down “some” news apps in China at government request.
• Epic’s lawyer shows Tim Cook the App Store privacy policy, showing that Apple can collect certain data on users for personalized ads. Cook says, “I’m not familiar.”
• Epic’s lawyer says there are instances were Apple’s privacy focus does not mesh with its financial interests.
• Now we’re moving on to privacy. Cook says Apple has a unique ability to safeguard privacy, Epic’s lawyer disagree.
• Cook says “there are just a few” developers who don’t like the App Store system. The Epic lawyer asks if Cook would be surprised to learn no developers are testifying for Apple. “That does not surprise me. I don’t see that there would be a natural way to include them,” Cook says.
• “We’d have to differentiate, I don’t know what we’d do,” Cook says when asked about competing with a third-party app store on the iPhone. “It’s an experiment I wouldn’t want to run,” Cook adds.
• Cook says he does not know if customers would be able to tell a difference between a third-party app store and Apple’s App Store.
• Epic’s lawyer presses Cook on why customers can only download apps from the App Store. “When customers buy an iPhone today, they buy something that just works. I think people buy a whole ecosystem.”
• And we’re back. Epic’s lawyer kicks off with: “You believe users pay Apple to make decisions for them?” Cook says, “I believe when they buy an iPhone they expect certain decisions to be made with them so that things become simple and not complex.”
• Going into recess for 20 minutes. Cook is told not to talk to anyone about his testimony.
• Cook is asked how the App Store can be described as “curated” when there are 1.8 million apps. Cook says “they have to live up to the rules.” Cook says they “feature apps,” and “we’re not passing a moral judgment on them.”
• Epic’s lawyer asks about language in the developer agreement that Apple can withhold revenue from developers if it “suspects” app developers are engaging in suspicious behavior. Cook says he’s unaware of this.
• Cook is asked about his knowledge of Apple’s Developer Program License Agreement. Cook says he only has “a vague knowledge” of the program.
• Epic’s lawyer asks if Apple threatened to retaliate against the Unreal Engine, Cook says Apple does not retaliate against developers.
• Cook says it would “benefit” the user if Epic came back to the App Store. Epic’s lawyer asks if the “hundreds of millions of dollars” Apple has received from Epic over the years would be a factor. Cook says it is not about the money.
• Cook confirms that he agreed with the decision to terminate Epic’s developer account.
• Epic’s lawyer asks Cook about Apple’s deal with Google for the search engine to be the default. Cook says he doesn’t know if the deal is worth “upwards of $10 billion.” Cook says, “They pay us money, if that’s what you mean.”
• The accounting 101 class is over and we’re moving on to In-App Purchases. Cook says it reduces friction.
• The Epic lawyer is trying to suggest that Apple DOES have some internal accounting way to track profit and operating margin of the App Store. Cook continues to disagree. Lots of back and forth about this.
• Epic’s lawyer asks Cook about a document with an analysis that attributes R&D numbers to different products. Cook says this was done on a direct basis for direct costs.
• Cook says revenue from the iOS App Store is “a lot larger” than the Mac App Store.
• Things are getting a little tricky to follow because specific information here is under seal.
• Epic’s lawyer continues to press Cook on whether Apple has P&L data for individual businesses. Epic’s expert witness calculated that the App Store ran with a 78% profit margin in 2018 and 2019.
• Epic’s lawyer plays a clip from an an antitrust hearing in the senate of Kyle Andeer, Apple’s chief compliance officer, testifying that Apple doesn’t have a separate P&L statement for the App Store.
• “Customers don’t buy operating systems, they buy devices,” Cook says when asked if Google and Apple compete on operating systems.
• Epic’s lawyer is pressing Cook on App Store Search Ads as they relate to an email chain about improving discoverability in the App Store. Cook says Apple also offers the editorial Today tab.
• Now we’re moving onto cross examination from Epic’s counsel Gary Bornstein
• “We would also have to come up with an alternate way of collecting our commission,” Cook says. “We would then have to figure out how to track what’s going on and invoice it and then chase the developers down. It seems like a process that doesn’t need to exist.”
• What would it mean if Epic prevailed and alternative app stores were allowed on the iPhone? “It’d be terrible for the user. We review 100,000 apps per week, and we reject 40,000.” Turning off app review would turn the App Store into a “toxic mess”
• Cook is now giving us an accounting lesson, detailing various ways for calculating margin and P&L
• Apple’s lawyer and Cook are now analyzing a document that Epic presented as evidence, the document is sealed but it seemingly pertains to some internal numbers on operating margins. Cook denies that the documents show anything about profit and loss for individual businesses.
• Cook says that be believes the App Store is profitable, but does not have a specific number.
• Cook says that Apple does not track profit and loss for individual businesses within Apple. Cook says that Steve Jobs told him a story once that he found Apple losing a billion dollars a year, but all the divisions had made money.
• Cook says that he does not think the availability of iMessage on the iPhone has kept people form switching to Android.
• Cook says that Apple offers tools that help customers switch from Android to iPhone, and that Android manufacturers offer similar tools for the opposite scenario.
• Apple’s lawyer asks Cook about an email from Steve Jobs about “locking customers into” the Apple ecosystem. Cook says it’s about making the products work well together so customers don’t want to leave.
• Apple’s lawyer asks Cook about the term “sticky.” Cook says “it means to have such a high customer satisfaction that people don’t want to leave,” but says he doesn’t hear it used internally at Apple often.
• “We’re making efforts to get Android people to switch to iPhone,” Cook says while laughing.
• Cook says Apple does not make it difficult for iPhone users to switch to Android. Cites Data Transfer Project for moving photos from Apple to Google.
• “I’m not a gamer,” Cook says when asked about competitor app stores such as Sony, Microsoft, and Nintendo.
• iPhone has “high 30s” percentage share in the United States.
• Cook explains that Apple has a 15% share of smartphone market worldwide, Android is dominant.
  • “Samsung, Vivo, Opposite, Huawei, Google, there’s a whole list of different fierce competitors.”
• On why developers can’t link to other payment methods: “It would be akin to Apple down at Best Buy saying ‘Best Buy, put in a sign there where we are advertising that you can go across the street and get an iPhone.'”
• Cook recapping the days of software before the App Store, how the App Store differs from the competition
• “That was in the back of my mind, but the primary reason was COVID,” Cook says when asked if potential antitrust regulation was a factor in launching Small Business Program.
• Cook says “the primary reason was COVID” when deciding why to drop the App Store commission to 15% for those making under $1 million
• 85% of the apps on the App Store are free and therefore pay no commission. Other apps pay either 15% or 30%.
• Cook and Apple’s lawyer are going over Apple financial documents, showing the increase each year in R&D spending. Pointing out that this increase in R&D spending benefits the App Store.
• Cook says that Apple has massively invested in R&D, including in ways to improve the App Store
• Cook and Apple’s lawyer are discussing an email chain between Tim Cook, Eddy Cue, and Phil Schiller about improving app review from 2015
• On mistakes slipping past app review: “You will find mistakes we’ve made, but if you back up and look at it in the scheme of things, we do a really good job.”
• Cook says he does not believe third-parties could perform app review as effectively as Apple can
• “You can see in third-party data that if you look at the malware that’s on iOS vs. Android vs. Windows, it’s literally an off-the-chart level of difference. There’s about 1-2% of the malware is on the iPhone vs. around 30-40% on Android and another 30-40% on Windows. It’s quite a difference.”
• “You have a phone in your pocket most of the time and you want instant service. We felt both the use cases and the threat profile would eventually be much greater because of the number of iPhones on the market, so we created the app review process.”
• Cook discussing the App Store vs web apps, how the iPhone experience compares to the Mac
• On developer response to privacy features: “Some applaud it, some are not happy with it. We listen, we’re making decisions in the best interest of the user. Sometimes there’s a conflict between what the developer wants and what the user wants.”
• Cook recapping what Apple does to protect user privacy: Intelligent Tracking Prevention, App Tracking Transparency, App Store nutrition labels
• “In the case of the App Store, we review every app that goes on the store. There can be malicious things that occur, things that vacuum up people’s data, malware, the list is pretty long.”
• “Technology has the ability to vacuum up all kinds of data from people. We like to provide people tools to circumvent that.”
• “We take a lot of the complexity of technology away from the user and make things simple and not complex.”
• “We have a maniacal focus on the user.”
• $100 billion invested in R&D since the start of the iPhone development, $50 billion in the last 3 years
• Apple’s counsel Veronica S. Moye of GIbson Dunn is examining Cook
• Cook has been sworn in and is recapping his role at Apple, his education, and his career before joining Apple
• Cook is expected to take the stand shortly once administrative tasks are wrapped up
• Tim Cook has entered the building, donning the Apple Face Mask:

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