Delaware District Court Dismisses App Developer’s Monopoly Claims Against Tech Giant
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  • Delaware District Court Dismisses App Developer’s Monopoly Claims Against Tech Giant

    On July 9, 2021, Judge Leonard P. Stark of the United States District Court for the District of Delaware granted defendant’s motion to dismiss antitrust claims brought by an application (“app”) developer against one of the world’s largest technology companies for failing to adequately allege that requiring apps to offer a defendant-specific log-in function harmed competition.  Blix Inc. v. Apple, Inc., C.A. No. 19-1869-LPS (D. Del. July 9, 2021).

    Plaintiff is Blix Inc., a software company that develops email and messaging apps.  Defendant is Apple, Inc., which produces consumer electronics products and owns and operates the “App Store” marketplace for apps designed to run on Apple’s iOS operating system.  Plaintiff alleged that defendant restricted competition in violation of Sherman Act Section 2 by constructing a “moat” around “its user base by a series of actions that . . . make it difficult and expensive for Apple iOS users to leave the coordinated technological ecosystem.”  Specifically, plaintiff alleged that defendant maintained monopoly power in the mobile operating system market by pricing hardware at a high level, offering proprietary apps, controlling iOS app development and app payment processing, and misappropriating ideas from third-party app developers.

    Plaintiff based its monopoly maintenance claim largely on related patent infringement claims, asserting that defendant stole the idea for “Sign In With Apple”—a “Single Sign On” (“SSO”) authentication feature that enables users to sign in to various accounts using their Apple ID—from one of plaintiff’s apps.  Plaintiff alleged that in order to restrict competition in the alleged mobile operating system market, defendant requires third-party app developers to offer Sign In With Apple as an alternative to other SSO options whenever those options are included in apps designed for Apple iOS, thereby “inject[ing] itself as an intermediary between the developer and the user of its app.”  Plaintiff also brought additional claims under Sherman Act Sections 1 and 2, alleging that defendant engaged in an unlawful tying arrangement by coercing users and developers to purchase its Sign In With Apple product as a condition of purchasing and using Apple devices running iOS.

    The Court found that plaintiff did not adequately state an unlawful monopoly claim because plaintiff failed to plead a necessary element for liability under Sherman Act Section 2: “the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”  According to the Court, plaintiff could not explain how defendant’s policy restricts competition in the alleged mobile operating system market by requiring the Sign In With Apple option whenever an SSO product is offered.  Instead, Judge Stark reasoned that the policy actually expands consumer choice.  Significantly, the policy does not foreclose the use of other SSOs and makes implementation of Sign In With Apple voluntary because app “developers may choose to implement no SSO at all, to implement only Sign In With Apple, or to implement Sign In With Apple in conjunction with other SSOs.”  Further emphasizing that a “fundamental premise” of plaintiff’s claim was its allegation that defendant stole plaintiff’s patented technology as part of an effort to maintain monopoly power, Judge Stark ruled that the Court’s prior dismissal of these patent infringement claims also caused the monopoly allegations to fail.

    Turning to the tying arrangement claims, the Court held that plaintiff did not plead sufficient facts to establish “an agreement by a party to sell one product . . . on the condition that the buyer also purchases a different (or tied) product[.]”  Here, plaintiff suggested that the tying product was Apple’s iOS, and the tied product was Sign In With Apple.  However, Judge Stark explained that many iOS apps do not include a sign in function at all, and the Complaint itself indicated that “Sign In With Apple is not always implemented in conjunction with purchase of iOS.”  Apps that do require users to sign in are also not obligated to use an SSO feature, meaning they would not necessarily require implementation of the Sign In With Apple option.  Therefore, because purchasers of devices running iOS and developers of iOS apps are not required to implement Sign In With Apple, and there was no allegation that developers are forced to purchase iOS as a condition of implementing the Sign In With Apple feature, plaintiff failed to allege the existence of an unlawful tying arrangement.

    Concluding that plaintiff’s antitrust claims remained unavailing after multiple opportunities to amend, Judge Stark granted defendant’s motion and dismissed the case with prejudice.