Slipping Through the Cracks: Limited legal means for developers to protect the ideas behind their apps
Ashley Ulrich is a J.D. candidate, 2021 at NYU School of Law.
Introduction
Recent news articles have documented Apple’s use of its App
Store to identify and copy ideas from best-performing third-party applications.
Apple then incorporates these ideas into its own applications or phone
features, to the detriment of third-party app sellers. The conduct is common
enough to have an industry moniker – “getting Sherlocked,” a reference to Apple
copying many features of a third-party application to design its desktop search
tool, “Sherlock.”
Whereas Apple’s conduct raises anti-competitive and IP
infringement concerns, it likely falls short of an actionable claim for third-party
developers. This blog post explores why
third-party developers are unlikely to be successful in an anti-trust,
copyright or patent infringement case against Apple.
Overview of Apple’s practices
A recent Washington
Post article identified several instances from the mid-2000s to present
where Apple used ideas from third party developers’ applications to inspire its
own applications or phone features. These included ideas for a phone
flashlight, screen cast function, type-by-swiping tool, and walk-talkie
function, among others.
Whereas many developers take inspiration from existing
applications, Apple’s practice is unique because the
company chooses which ideas to incorporate based on user data it gathers in its
App Store. Apple collects data from
third-party applications about users’ downloads, time spent in-app, and spending
on in-app purchases. Third-party developers, however, do not have the same
access to user data across all applications sold in the App Store.
The article also outlined several instances where Apple integrated
ideas from third-party developers into existing applications like Apple Music
or the phone’s operating system, which are typically closed to third-party
developers. Further, Apple typically offers
its applications and features to buyers for free, while existing applications charge
consumers per download, require in-app purchases, or display ads.
The result of Apple’s conduct is that many third-party
developers whose ideas Apple used have lost significant or all revenue and have
been forced to exit the market. Flashlight
application myLite, for example, had 10 million monthly users in 2013 but
saw its revenue fell to “essentially zero” in the months after Apple integrated
this function into its standard tools.
Anti-trust implications
Under Section 2 of the Sherman Act (the
“Act”), it is a felony for any person (or corporation) to “monopolize, or
attempt to monopolize” in trade or commerce.
Merely having market power is not a violation of the Act, but a firm’s having
market power and engaging in conduct that is undesirable and
exclusionary is prohibited. This
distinction recognizes that a company might gain and maintain market power
through competition on the merits, which is permitted.
A plaintiff can establish that the defendant has market
power through showing that the firm raised
prices substantially above competitive levels or possesses a dominant market
share in the relevant market. The latter and more common approach defines
“relevant market” as the market for all products reasonably
interchangeable for the same purpose as the defendant’s product.
Here, a third-party application developer will likely struggle
to show that Apple has market power in the relevant market – the market for
application sales. Apple only sells about 40 of the two
million applications sold through its App Store, and it does not sell some
of the
most popular applications like YouTube, Facebook, Instagram, and Netflix.
Apple’s dominance in the markets for smartphone
hardware (largest U.S. smartphone hardware sales) and/or operating
software (largest U.S. smartphone OS provider) are irrelevant.
Even if a third-party application developer could show that
Apple has market power in the relevant market, it likely cannot show that
Apple’s conduct is undesirable and exclusionary. Existing case law requires that Apple’s
conduct results in an “anticompetitive effect” to consumers, typically shown through
increased prices, decreased output, and/or decreased quality. Merely showing
harm to a competitor or competitors in insufficient; instead, a plaintiff
must show that the defendant firm’s conduct harmed competition in the relevant
market.
Here, a third-party developer will likely struggle to show
that Apple’s conduct, while harmful to competitors, harmed overall market
competition. Apple has never required
users to exclusively download its applications, and it has never barred third-party
sellers from selling through its store because their applications competed with
Apple. While a third-party developer
could try to argue that Apple’s free applications reflect predatory pricing,
many applications are free to consumers through use of advertisements. Further, Apple could rebut any credible
anti-competitive effect with a showing that its actions were pro-competitive,
for example, through offering consumers access to a desired feature at a
favorable price point and better integration.
A third-party developer could try to argue that Apple’s use
of its App Store to pick “winning” ideas from third-party developers tends to
destroy competition itself, through lowering investment incentives for
developers. However, app developers always face the risk that new market
entrants will win market share by offering cheaper or higher quality
applications to market. And, the number
of app developers who sell
through Apple’s store each year continues to rise, suggesting that overall,
developers are not deterred from entering the market due to Apple’s behavior.
Of course, Apple is in part able to compete in this manner
because it has market power in adjacent markets – the markets for smartphone
hardware and operating
software. Developers must sell
through the App Store if they want to reach the half of U.S. smartphone users
who are iOS users – a $46.6B market (by
total revenue) in 2018. However, without
more evidence of Apple’s anti-competitive conduct in the market for application
sales, third-party developers are unlikely to have a triable anti-trust case.
Copyright infringement implications
Copyright law protects literary, musical, dramatic,
pictorial, architectural, and other works.
Courts
have long recognized the copyrightability of original computer source code and
object code, the literal or textual elements of software. Copyright
law also affords protection to non-literal elements of a computer program,
including its sequences, structure, organization, and user interface.
Non-literal protection for computer code, however, does not
extend to protection of the idea underlying a work.
Assuming that a third-party developer has a valid copyright
for her application, she is unlikely to be able to prove a case arising from
infringement of the literal or non-literal elements of her software. It is unlikely that Apple is using the
literal code underlying a third-party developer’s application in its own work. Further, without access to a third-party
developer’s code base, it is unlikely that Apple is using a third-party
developer’s sequences, structures, or organization. In addition, any non-literal code
similarities due to
reasons of efficiency, necessity, or public availability are permissible.
Thus, a third-party developer likely only has an actionable copyright
claim if she can show substantial similarities with elements of pictorial and
graphic elements in her application. If not, a third-party developer likely can
only establish that the idea of Apple’s application is the same as her own,
which is not protectable under copyright law.
Patent infringement implications
Patent law serves to protect discoveries. Such protection does extend to the idea,
procedure, process or system that underlies a work. However, practically speaking, most
software developers do not seek patent protection, because this process is
much more complex, costly and time-consuming than copyright protection. Further,
protecting patents against infringement is costly, typically involving a
drawn-out legal battle in federal court.
To the extent that a developer does have patent protection
for the idea underlying his application, he needs to show both that his patent
is valid – i.e., the idea, procedure, process or system that it describes is
novel and non-obvious – and that the defendant makes, uses, offers
to sell or sells something that contains every element of the patented claim. The defendant’s non-use of even one claim
element will prevent liability.
As such, patent protection may be the most fruitful way for
developers to enjoin Apple’s practice of using their ideas in its own
applications. However, because patent protection remains under-utilized in the
software development community, this recourse will be available to few.
