Apple Inc. (AAPL.US) loses appeal in tug-of-war battle with Epic, banned from charging 27% commission but allowed to charge intellectual property fees.

Apple Inc. (AAPL.US) failed to successfully challenge the judge's reprimand for its defiance of orders, but won a new opportunity to defend itself regarding charging transaction fees to developers outside of the app store. In a long-standing dispute with Epic Games Inc., a federal appeals court rejected the iPhone manufacturer's challenge to a ruling from April on Thursday. The ruling found that Apple Inc. intentionally violated the judge's orders, who had previously ruled that Apple Inc. engaged in anticompetitive behavior in violation of California law. However, in the 54-page ruling, the U.S. Ninth Circuit Court of Appeals directed District Judge Yvonne Gonzalez Rogers to consider allowing Apple Inc. to charge developers a certain commission for its intellectual property use - just not at the 27% level originally set by the company. The unanimous three-judge panel stated: "The district court improperly enjoined all commissions in a blanket manner, exceeding the bounds of the court's discretion. Apple is entitled to compensation for its intellectual property used directly to facilitate external payments by Epic and others." Apple Inc. did not immediately respond to a request for comment. The legal dispute has been ongoing for over five years, stemming from Epic, the developer of the popular game "Fortnite," accusing Apple Inc. of unlawfully impeding competition in its app store. Judge Rogers ruled in April that Apple Inc. deliberately defied her 2021 order, which required Apple Inc. to allow developers to direct consumers to cheaper online payment options. Apple Inc. has been taking commissions of 15% to 30% from most in-app purchases, which has long been a source of frustration for developers. Apple Inc. generates billions of dollars in revenue annually from commissions on digital sales in its app store. The company does not report app store sales revenue separately, but has stated that it "facilitated" over $400 billion in developer sales in 2024. Appfigures, a mobile analytics and insights platform, estimates that Apple Inc. generated $10 billion in revenue from its U.S. app store in 2024. Following the 2021 trial, Judge Rogers largely sided with Apple Inc. over Epic in ruling that app store policies did not violate federal antitrust laws. However, she found that Apple Inc. violated California law and ordered the company to allow developers to direct consumers to cheaper online payment options. This ruling was upheld by the Ninth Circuit Court of Appeals and the U.S. Supreme Court. In response, Apple Inc. allowed developers to direct users to websites for transactions, but imposed a new 27% commission on revenue generated through such methods. Subsequently, Epic accused Apple Inc. of defying the 2021 ruling by charging new commissions and imposing other restrictions on link placement and design.