No. 17-204
In the

Supreme Court of the United States
Apple Inc.,
Petitioner,
v.
Robert Pepper, et al.,
Respondents.

On Writ of Certiorari to the United States
Court of A ppeals for the Ninth Circuit

Brief of ACT   The App Association
as Amicus Curiae in Support
of Petitioner
Brian Scarpelli
Counsel of Record
Joel Thayer
ACT   The A pp A ssociation
1401 K Street, NW, Suite 501
Washington, DC 20005
(517) 507-1446
bscarpelli@actonline.org
jthayer@actonline.org
Counsel for Amicus Curiae
283125

A
(800) 274-3321 • (800) 359-6859

 i
TABle of ConTenTs
Page
TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . i
TABLE OF CITED AUTHORITIES . . . . . . . . . . . . . .  iii
Interest of Amicus Curiae . . . . . . . . . . . . . . . . 1
Summary of Argument  . . . . . . . . . . . . . . . . . . . . 2
Argument  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
I. The Ninth Circuit Factually Ignoring the
Procompetitive Agency-Sale Relationship
App Developers Have with App Stores
 
Fatally Skews its Reasoning and Conclusions . . 5
A. T he b e ne f it s of t he s y mbiot ic
relationship between app developers
 
and app platforms . . . . . . . . . . . . . . . . . . . . . . 7
1. Platforms lower overhead costs that
 
simplify market entry . . . . . . . . . . . . . . . 7
2. Platforms give app developers
instant access to international
 markets . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3. Before platforms, app developers
struggled to build trust with end
 users . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

 ii
Table of Contents
Page
4. Platforms strengthen intellectual
property protections for app
 developers . . . . . . . . . . . . . . . . . . . . . . . .13
B. By Ignoring the Roles of Market
Participants in the App Economy, the
Ninth Circuit’s Functional Approach
of the Direct Sellers Rule Implicitly
Categorizes Petitioner as a Reseller of
 
all Apps it Hosts on its Platform  . . . . . . . . 15
II. The Ninth Circuit Misapplies Illinois
Brick, and Would Allow Consumers to
Interject into the Platform and App
 
Developer Business Relationship . . . . . . . . . . . . 18
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

 iii
TABle of CiTeD AuThoriTies
Page
CASES
Dastar Corp. v.
Twentieth Century Fox Film Corp.,
  539 U.S. 23 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Delaware Valley Surgical Supply, Inc. v.
Johnson & Johnson,
  523 F.3d 1116 (9th Cir. 2008) . . . . . . . . . . . . . 20, 21, 23
Hanover Shoe, Inc. v.
United Shoe Machinery Corp.,
  392 U.S. 481 (1968) . . . . . . . . . . . . . . . . . . . . . . . . 18, 19
Illinois Brick Co. v. Illinois,
  431 U.S. 720 (1977) . . . . . . . . . . . . . . . . . . . . . . . passim
In re Apple iPhone Antitrust Litig.,
  846 F.3d 313 (9th Cir. 2017) . . . . . . . . . . . . . . . . . 20, 21
In re Apple iPhone Antitrust Litig.,
  No. 11-CV-06714-YGR, 2013 WL 6253147
(N.D. Cal. Dec. 2, 2013), rev’d and remanded
sub nom. In re Apple iPhone Antitrust Litig.,
  846 F.3d 313 (9th Cir. 2017) . . . . . . . . . . . . . . . . . 19, 21
Kansas v. UtiliCorp United, Inc.,
  497 U.S. 199 (1990)  . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Petrella v. Metro-Goldwyn-Mayer, Inc.,
  134 S. Ct. 1962 (2014)  . . . . . . . . . . . . . . . . . . . . . . . . . . 1

 iv
Cited Authorities
Page
United States v. Microsoft Corp.,
  253 F.3d 34 (D.C. Cir. 2001) . . . . . . . . . . . . . . . . . . . . . 1
STATUTES AND OTHER AUTHORITIES
15 U.S.C. § 15(a)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Rule 12(b)(6)  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ACT   The App Association, The Symbiotic
Relationship Between App Developers
and Platfor ms: A Ten-Year Retrospect,
  Website (last checked, August 7, 2018) . . . . . . . . . . . 21
Adam Jaffe & Benjamin Jones, The Changing
Frontier: Rethinking Science and
Innovation Policy, National Bureau of
  Economic Research (2015) . . . . . . . . . . . . . . . . . . . . . . 9
Dan Russell-Pinson, OMG! Someone Copied
My Ap p . W h a t D o I D o No w?, ACT
    T he A pp A ssociation (August 30, 2017) . . . . . . . 14
Deloitte, The App Economy of the United
St a t e s: A Re v i e w of t h e Mob i l e Ap p
Market its Contr ibuiton to the United
 States, Report (forthcoming 2018)  . . . . . . . . . .  7, 8, 10

 v
Cited Authorities
Page
Erik Brynjolfssn & Michael Smith, Frictionless
Commerce? A Compar ison of Inter net
  and Conventional Retailers, MIT (1999)  . . . . . . . . 12
Hugo Delgado, The App Economy
Forecast: A $6 Tr illion Market in the
 Making, App Annie (2017) . . . . . . . . . . . . . . . . . . 11, 22
K e l ly Joh n s on S w a n , Uni t e d St a t e s :
Th e Tr u e Cos t of Defe n din g Again s t
C o p y r i g h t In f r i n g e m e n t L i t i g a t i o n ,
  Scott & Scott LLP (August 19, 2015) . . . . . . . . . . . . 14
Ket a n P rat ap, Ap pl e Says Devel opers
Earned Over $70 Billion Since App Store’s
 Launch, Gadget 360 (Jun. 1, 2017)  . . . . . . . . . . . . . . 11
Milton Handler, Changing Trends in Antitrust
Doctrines: An Unprecedented Supreme Court
 Term—1977, 77 Colum. L. Rev. 979 (1977) . . . . . . . . 16
Roya Stephens & Adarsh Mahesh, State of the App
 Economy, ACT   The App Association (2018) . . . . 3, 5
Sarah Perez, Paid Apps on the Decline: 90% of
iOS Apps Are Free, Up From 80-84% During
2 010 - 2 012 , Sa ys F l u r r y, Te c hC r u nc h
  (Jul. 18, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

 vi
Cited Authorities
Page
St eve You ng, Ma kin g $1.5 Mi l li o n w ith
Ed u c a ti o n a l Ap p s w i t h Pi e r r e Ab el ,
  App Masters (Apr. 30, 2015)  . . . . . . . . . . . . . . . . . . . 10
St ew Chyou, Th e Hi st o r y of Sh areware,
  Thunderbolt (May 5, 2011) . . . . . . . . . . . . . . . . . . 12, 13
TEDx Talks, The New Startup Economics:
S t e p h e n F o r t e a t TE D x H K U S T ,
 Youtube (Apr. 2, 2013) . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Timothy F. Bresnahan, Jason P. David, and
Pai-Ling Yin, Economic Value Creation
in Mobile Applications, U n i v e r si t y o f
 Chicago P ress (July 2015) . . . . . . . . . . . . . . . . . . . . . 8
Zack W hittaker, Millions of Steam game
keys stolen af ter ha cker brea ches
  gaming site, ZDNet (2016),  . . . . . . . . . . . . . . . . . . . . 13

 1
Interest of Amicus Curiae1
ACT   The App Association (“App Association”)
is an international grassroots advocacy and education
organization representing more than 5,000 small app
developers and technology firms in the digital economy.
It is the only organization focused on the needs of small
business innovators from around the world. The App
Association advocates for an environment that inspires
and rewards innovation while giving resources to help its
members leverage their intellectual assets to raise capital,
create jobs, and continue innovating.
The App Association has participated as an amicus
curiae in the Supreme Court and other courts in cases
related to antitrust and technological innovation. See,
e.g., Petrella v. Metro-Goldwyn-Mayer, Inc., 134 S. Ct.
1962 (2014); Dastar Corp. v. Twentieth Century Fox Film
Corp., 539 U.S. 23 (2003); United States v. Microsoft
Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).
Technological innovation plays a critical role in enhancing
competition and improving the welfare of consumers;
therefore, the App Association has a keen interest in
ensuring courts properly apply federal antitrust law to the
dynamic industries and innovative technologies that drive
the app ecosystem. The App Association’s members rely
on app platforms give innovative products and services to
1.  Pursuant to Rule 37.6, amicus affirms that no counsel for
a party authored this brief in whole or in part and that no person
other than amicus and its counsel made a monetary contribution
to its preparation or submission. Both parties have consented to
the filing of this brief.

 2
billions of consumers in the United States and around the
globe. If the Ninth Circuit’s ruling stands, it will directly
affect the viability of app platforms, as well as developers’
ability to give services.
Summary of Argument
ACT   The App Association (“the App Association”)
urges the Court to overturn the Ninth Circuit’s decision
in this case on the basis that Respondent’s case relies on
the misguided assumption that they are direct purchasers
of Petitioners. As an association that represents actual
developers who rely on platforms such as the Petitioner’s
App Store, we find the Respondent’s characterization of
the relationship between platforms and app developers to
be factually inaccurate and disingenuously self-serving,
especially their blatant disregard for how our members
structure their pricing for their innovative products.
Today, the app economy represents $568.47 billion of
the United States’ economy and has 317,673 companies
active in the U.S.’s mobile app market; the app economy
is also responsible for creating 5,744,481 American jobs.
The App Association has long believed that agency-sale
relationships are procompetitive arrangements that
lower costs for consumers and has contributed to the
app economy’s success. The agency-sale approach gives
independent app developers autonomy and flexibility in
how they offer their apps to consumers, whether it be free
with in-app purchases, subscription-based sales, one-time
purchase, etc. See App Store Guidelines. Successful app
platforms, like Petitioner’s App Store, have revolutionized
the app ecosystem by providing app developers with
eased access to a much broader swath of consumers and

 3
platform users, resulting in a flourishing app economy that
has enabled our members to grow and create 4.7 million
American jobs. See Roya Stephens & Adarsh Mahesh,
State of the App Economy, ACT   The App Association
(2018) Available at: http://actonline.org/wp-content/
uploads/ACT_2018-State-of-the-App-Economy-Report_4.
pdf. The App Association implores courts and lawmakers
to avoid disrupting the symbiotic and pro-consumer
relationship that exists between app developers and app
platforms.
In the instant case, the Ninth Circuit completely
ignored how our members interact with various mobile
platforms by suggesting that Petitioner owns and controls
the relationship with our members’ customers. This
implies that platforms serve more as resellers of apps it
hosts on its platform and, thus, allows them to dictate the
price of those apps to consumers. To assist this Court,
we explain and explore the realities of the relationship
between app developers and app platforms. Additionally,
we examine the net effects on American consumers; and
why, ultimately, the Ninth Circuit’s interpretation of this
relationship, at the core of the matter at hand, is misguided
and, if upheld, could damage and disrupt an ecosystem
that has demonstrated significant societal value.
Moreover, the Ninth Circuit’s interpretation of
consumers as direct buyers from the Petitioner incorrectly
assumes the Petitioner has ownership rights in app
developers’ apps. To draw this conclusion, the Ninth
Circuit relies on its misunderstanding of the agency-sale
relationship app developers have with platform owners.
In reality, the Petitioner is only entitled to the agreed
upon percentage of the app developers’ app fee. Aside

 4
from this fee, the Petitioner has no ownership rights to
the app. In addition, app developers can offer their apps
on platforms not owned by the Petitioner, unencumbered
by the Petitioner. All creative rights solely belong to the
app developer and are uninhibited by the Petitioner.
Moreover, when a consumer agrees to the “terms of
service” for each app he or she buys, the app’s developer
keeps sole responsibility for any breach of those terms.
App developers are also solely responsible for any
disruption in their service because of a lack of integrity
in their code, and the onus is on them to fix it. Thus, the
Ninth Circuit appears to be confused as to what or from
whom the consumer is buying when they purchase an app.
By any estimation, it is clear that the consumer is the app
developer’s customer, not the platform’s.
The Ninth Circuit also is indifferent as to who sets
the prices of apps. Again, this point is undisputed from
our perspective: the app developer sets this price. The
Petitioner is not making app developers set a price for the
consumers who purchase their apps through the App Store
platform, which is categorically inaccurate. Moreover, this
interpretation, in effect, misappropriates and confuses
who pays for what in the app economy, which is precisely
what Illinois Brick sought to prevent from happening.
At the heart of the Illinois Brick doctrine, this
Court expressed concern of indirect purchasers taking
issue with upstream negotiations and providing indirect
purchasers the ability to object to the negotiated price
from upstream agreements to which they were not a party.
Central in an Illinois Brick analysis is examining where
the direct contractual relationship exists; put another
way: who is selling to whom. As a result, for purposes of

 5
antitrust standing, people or entities can only sue those
companies that have direct control over the product and
its pricing.
For these reasons, we respectfully request the Court
overturn the Ninth Circuit’s decision in this case.
Argument
I.  The Ninth Circuit Factually Ig noring the
Procompetitive Agency-Sale Relationship App
Developers Have with App Stores Fatally Skews its
Reasoning and Conclusions
The app ecosystem has developed alongside the rise of
the smartphone and has experienced substantial growth
in its less than ten years of existence. Small-to-medium
entities (SMEs) are leaders in the $950.6 billion app
ecosystem that has revolutionized the software industry
and influenced every sector of the economy, representing
approximately 4.7 million American jobs. Roya Stevens
& Adarsh Mahesh, State of the App Economy, ACT  
The A pp A ssociation (2018) at http://actonline.org/wpcontent/uploads/ ACT_2018-State-of-the-App-EconomyReport_4.pdf (App Economy Report). To facilitate the
rise of the internet of things (IoT)2 , trusted and curated
app stores will be vital to providing the apps that serve
as the interface for IoT devices. The opportunities and
potential for IoT will hinge on the app economy’s continued
innovation, investment, and growth.
2.  IoT is an encompassing concept where everyday products
use the internet to share data collected from sensors, enabling
greater efficiency in processes, products, and services across
every sector.

 6
The App Association has long believed, and our
experience for over a decade demonstrates, that agencysale relationships are procompetitive arrangements that
lower costs for consumers in the context of software apps.
Brief for ACT   The App Association as Amicus Curiae, p.
11, Apple, Inc, v. U.S., Case No. 15-565 (2015). The agencysale approach gives independent app developers autonomy
and flexibility in how they offer their apps to consumers,
whether it be free with in-app purchases, subscriptionbased sales, one-time purchase, etc. See App Store
Guidelines. Successful app platforms, like Petitioner’s App
Store, have changed the app ecosystem, which provides
app developers with ubiquitous access to a far broader
swath of consumers and platform users worldwide than
could be reached through the sole efforts of the developer.
This scenario has led to a flourishing app economy
that has benefited our members and consumers both.
Chuck Jones, Apple’s App Store Generating Meaningful
Revenue, Forbes (Jan. 6, 2017, 2:10 PM), https://www.
forbes.com/sites/chuckjones/2017/01/06/apples-appstore-generating-meaningful-revenue/#305d93011eb6
(reporting developers receiving $20 billion in revenue).
The App Association implores courts and lawmakers not
to disrupt the symbiotic relationship existing between
these two entities.
In the instant case, the Ninth Circuit completely
ignored how our members interact with various mobile
platforms by suggesting that Petitioner owns and
controls the relationship with our members’ customers.
This implies platforms serve more as resellers of apps it
hosts on its platform and, thus, allows them to dictate the
price of those apps to consumers. To assist this Court,
we explain and explore the realities of the relationship
between app developers and app platforms, and the net

 7
effects on American consumers; and why, ultimately,
the Ninth Circuit’s interpretation of this relationship,
at the core of the matter at hand, is misguided and, if
upheld, could damage and disrupt an ecosystem that has
demonstrated significant societal value.
A.  The benefits of the symbiotic relationship
between app developers and app platforms
The relationship between platforms and app companies
is mutually beneficial, and one that should be fostered and
supported. Not only do platforms provide app companies
with secure market access, consumer trust, developer
autonomy, dispute resolution, and meaningful consumer
analytics; they provide a vital resource to bring the
ingenuity and innovations of app companies to consumers
around the globe. See App Economy Report. Further,
the developer-platform partnership is procompetitive
and lowers costs for consumers. These relationships
provide app developers with a significant amount of
disintermediation to reach consumers around the globe
without having the developer forfeit the ability to control
their business and pricing structure. See Deloitte, The App
Economy of the United States: A Review of the Mobile
App Market its Contribution to the United States, Report
(forthcoming 2018) (finding that “app stores do not set the
prices of apps, this decision being the sole prerogative of
developers”) (Deloitte Study).
1. Platforms lower overhead costs that
simplify market entry
Before centralized platforms, app developers were
forced to absorb significant costs and manage various
relationships to distribute their product to a wide

 8
consumer base. See Timothy F. Bresnahan, Jason P.
David, and Pai-Ling Yin, Economic Value Creation in
Mobile Applications, University of C hicago P ress
(July 2015). Available at http://www.nber.org/chapters/
c13044.pdf (writing “[t]he rapid growth of mobile devices
has been accompanied by an equally rapid growth in
app development, in substantial part because platform
providers Apple and Google have lowered the costs of
development and distribution of mobile applications.”).
Much more complex than a direct developer-consumer
exchange, software companies used distributors to reach
and engage with end users. Developers had to sacrifice
valuable time from product development to establish
relationships with distributors and were beholden to
strict and costly rules even before they made their
products available to consumers. Today, the app economy
represents $568.47 billion of the United States’ economy
and has 317,673 companies active in the U.S.’s mobile app
market; the app economy is also responsible for creating
5,744,481 American jobs. See Deloitte Study.
In simplest terms, independent software developers
either paid to offload the overhead to a publisher or
absorbed the cost and uncertainty of sales internally.
These barriers to entry impacted hundreds of thousands
of software developers and companies around the world;
thus resulting in higher prices and fewer choices for
consumers.
While the concept of mobile platforms existed in both
BlackBerry and WindowsCE, it did not gather steam until
2008, when Petitioner paired its then-new iPhone with
an integrated application storefront. Multiple companies
quickly followed Petitioner’s direction and launched stores

 9
or marketplaces designed for various products. This
created an entirely new internet-enabled economy that
incorporated small businesses and reduced financial and
temporal costs for developers.
As we alluded to earlier, software companies incurred
an extraordinary financial burden to bring their products
to market before the introduction of mobile platforms. For
instance, they had to engage in costly and time-consuming
marketing campaigns to establish consumer trust and
contract others to process financial transactions for them.
Adam Jaffe & Benjamin Jones, The Changing Frontier:
Rethinking Science and Innovation Policy, National
Bureau of Economic Research (2015) Available at https://
books.google.com/ books?id=QdopCwA AQBAJ&pg.
Platforms have since created a one-stop shop that
mitigates these costs so that more small businesses, like
our members, can take part in the app economy. See id.
At p. 238 (2015) (writing “[t]he rapid emergence of many
demanders, together with the very low barriers of entry
created by the platform providers, has led to a rapid
and very substantial expansion in the number of overall
apps.”).
In the late ‘90s, a software company had to spend
about $10 million just to get up and running. See TEDx
Talks, The New Startup Economics: Stephen Forte
at TEDxHKUST, Youtube (Apr. 2, 2013), https://www.
youtube.com/watch? v=t4IiYEtJU_s.
Today, the advent of free or inexpensive cloud services,
internet connectivity, and software tools have enabled
small-business app developers to bring their innovative
products to market with just a $100,000 check. See id.

 10
Platforms help lower the barrier to entry for small app
companies by shouldering the costs of privacy measures,
security, and intellectual property protections for their
users, thereby freeing up substantial amounts of capital
that startups can use to build and grow their business.
With lower costs and barriers to entry, both fledgling
and established app developers can succeed. For example,
French educational app company L’Escapadou secured
1.3 million downloads and earned more than $1.5 million
from app sales. Steve Young, Making $1.5 Million with
Educational Apps with Pierre Abel, App Masters (Apr. 30,
2015) Available at: http://bit.ly/2hgDzZH. Founder Pierre
Abel specialized the language, content, and pricing of each
of his apps based on consumers and market needs and
marketed them on different platforms to reach a variety
of consumers around the world. L’Escapadou attributes
its success to the centralized nature of platforms. See id.
This lower overhead is why the app economy is highly
competitive and one of the most innovative spaces on the
internet-enabled ecosystem. See Deloitte Study (finding
a causal relationship between app developers’ lowered
overhead through the use of mobile platforms and the app
economy’s success). For example, Petitioner’s App Store
provides a service that eases financial transactions (such as
billing to consumers) and provides consumers assurances
that all the apps sold are compliant with relevant tax
codes—something that software developers had to handle
themselves. Popular platforms also may choose to absorb
credit card fees to prevent them from transferring the cost
to the developer. Without this platform-enabled service, it
would fall on the app developer to handle each transaction;
again, falling outside the bounds of an app developer’s

 11
core competencies which, at times, is almost exclusively
limited to writing the code for their app.
2. Platforms give app developers instant
access to international markets
Successful platforms, like Petitioner’s App Store or
Google Play, have changed the app ecosystem by providing
app developers ubiquitous access to a broader swath of
consumers. Platforms provide a centralized framework for
app developers to engage and secure visibility with the
3.4 billion app users worldwide. Hugo Delgado, The App
Economy Forecast: A $6 Trillion Market in the Making,
App Annie (2017) Available at: http://bit.ly/2xfDqtB.
For instance, Petitioner’s App Store is available in 155
countries around the globe. Ketan Pratap, Apple Says
Developers Earned Over $70 Billion Since App Store’s
Launch, Gadget 360 (Jun. 1, 2017) http://gadgets.ndtv.com/
apps/news/apple-says-app-store-earned-developers-70billion-since-launch-1706781. By Petitioner hosting an app
company’s product on its platform, that app company now
has immediate access and reach to the same markets as
Petitioner for a nominal fee without having to build a brickand-mortar store or pay for an expensive an international
ad campaign.
3. 

Before platforms, app developers struggled
to build trust with end users

In the internet economy, end user trust – an established
relationship between the app company and consumer
where the consumer demonstrates confidence to disclose
otherwise personal information to an app company – is
extremely difficult to earn and maintain, especially

 12
when a single incident (e.g., a breach or cyberattack) can
permanently damage a business’s trust easily with their
customer. However, for a small business app developer,
this event can easily spell death for their company. While
brick-and-mortar retailers may be able to operate without
the use of most of a customer’s personal information, app
companies need different types of personal information to
develop and provide their innovative services to customers
(e.g., geolocation data, financial information, health data).
App companies are also different in that, without end
user trust, consumers are unlikely to disclose essential
information to an app company. Therefore, consumer trust
and willingness to share information are critical for an
app developer to succeed in the market, more so than for
brick-and-mortar.
Even before the advent of digital commerce, consumer
trust was a critical aspect of a software developer’s ability
to bring a product to market. Erik Brynjolfssn & Michael
Smith, Frictionless Commerce? A Comparison of Internet
and Conventional Retailers, MIT (1999) Available at:
http://bit.ly/2yrEJ8W (writing “[r]ecent scholars have
argued that trust is among the most important components
of any effective Internet marketing program.”). Prior to
platforms, software developers often had to hand over
their products to companies with a significant reputation
to break through the trust barrier. Even “shareware”
products that could be digitally distributed would end up
partnering with trusted brands to gain consumer trust.
Stew Chyou, The History of Shareware, Thunderbolt (May
5, 2011) Available at: http://bit.ly/2xvPuJ7. For example,
in 1996, developers of the computer game Ultimate Doom
contracted with Chex cereal to augment its consumer
base. Developers converted their game software to create

 13
the child-friendly game Chex Quest. See id. Today, most
games, like Ultimate Doom, are free to download on
platforms in app form like Petitioner’s App Store, Google
Play, or game-specific, independent platform Steam. These
platforms not only lower cost but can reach consumers
beyond those who buy a particular brand of cereal or
trusted product. Now, platforms are the trusted product.
But the trust mechanism provided by the platforms
is not merely an aspect of size. Consumer trust requires
constant maintenance and vigilance because a loss of trust
hurts platforms and the developers that depend on them.
Zack Whittaker, Millions of Steam game keys stolen after
hacker breaches gaming site, ZDNet (2016), Available at:
http://zd.net/2byBRLV (reporting “[t]he data also includes
an estimated 3.3 million unique site and forum accounts.”).
The immediate consumer trust embedded into platforms’
brands is worth billions of dollars. The Economics Of
Trust, Forbes (2010), Available at: http://bit.ly/2wJr76Y
(writing “[t]he reason why the U.S. is richer than Somalia
is mostly not because of culture. The great thing about
formal systems, when well designed, is that they make a
little bit of public spirit, altruism or professionalism go a
long way,” says Paul Seabright, an economics professor at
the University of Toulouse.”). Platforms’ trusted brands
allow developers to clear the critical hurdle of achieving
trust from consumer adoption.
4. Platforms strengthen intellectual property
protections for app developers
In the age of retail software distribution, companies
struggled to secure and protect their intellectual property
from theft and copyright abuse. Platforms not only

 14
provide an important framework for app companies to
engage with consumers, but they also assist in preventing
infringement of app companies’ intellectual property.
For example, Petitioner’s platform provides a content
dispute mechanism that allows app companies to submit a
claim to connect with entities that have allegedly violated
their intellectual property. Apple Inc., iTunes App Store
Content Dispute, Available at: http://apple.co/2xrvK9c.
While maintaining a database of all the apps it hosts,
the platform provides a mechanism that reduces the
hurdles companies must go through to tackle copyright
infringement. E.g., Dan Russell-Pinson, OMG! Someone
Copied My App. What Do I Do Now?, ACT   T he A pp
A ssociation (August 30, 2017) Available at: http://bit.
ly/2wKvm23.
Without the dispute resolution mechanisms of
platforms, app companies are often left with an untenable
alternative: copyright infringement litigation in federal
court. Federal litigation poses an oppressive burden on
app developers, particularly small businesses with limited
resources. Within these cases, the rightful owners of the
copyright may be faced with several thousand dollars per
month in legal fees, the expense of new license compliance,
and months or years diverted from company matters, not
to mention the cost if the litigation is unsuccessful. Kelly
Johnson Swan, United States: The True Cost of Defending
Against Copyright Infringement Litigation, Scott & Scott
LLP (August 19, 2015) Available at: http://bit.ly/2xsdOvf.
Platforms provide a vital, cost-effective avenue for app
developers and copyright holders to dispute and address
intellectual property theft and infringement.

 15
B.  By Ignoring the Roles of Market Participants
in the App Economy, the Ninth Circuit’s
Functional Approach of the Direct Sellers Rule
Implicitly Categorizes Petitioner as a Reseller
of all Apps it Hosts on its Platform
The Ninth Circuit’s decision at issue before this Court
radically expanded the eligible parties that may seek
antitrust class action relief against digital commerce
companies that utilize the agency sales approach by
baselessly disregarding the fact that Petitioner possesses
no property right in an app developer’s product. Under
Section 4 of the Clayton Act, “any person who shall be
injured in his business or property by reason of anything
forbidden in the antitrust laws may sue…and shall recover
threefold the damages by him sustained.” 15 U.S.C. § 15(a).
By virtue of the clause “any person,” courts may apply the
statute broadly. However, Illinois Brick Co. v. Illinois
limited that definition by only permitting courts to grant
antitrust standing under Rule 12(b)(6) if the plaintiff is
the direct purchaser of the company that overcharged
as opposed to “others in the chain of manufacture or
distribution.” 431 U.S. 720, 729 (1977).
In Illinois Brick, the State of Illinois sued a concrete
block manufacturer, Illinois Brick, for allegedly fixing
prices of concrete blocks. The manufacturer had sold the
blocks to masonry contractors who used the blocks to
build structures. Those contractors then subcontracted
other companies to build those structures to later sell to
the State of Illinois. The State then sued Illinois Brick
for passing on its unlawful overcharge at both stages
of the distribution chain; thus, driving up the State’s

 16
cost downstream when buying the structures from the
contractors. In this case, this Court rejected the State’s
argument because, if it were to accept such an analysis,
then it would make it almost impossible for a court to
discern where the harm—in this case, an overcharged
concrete block—actually occurred. Additionally, the
policy behind this ruling was that holding indirect
purchasers liable for passed-on overcharges would clog
up the court system and lead to costly litigation haling in
upstream and downstream actors unjustifiably. Milton
Handler, Changing Trends in Antitrust Doctrines: An
Unprecedented Supreme Court Term—1977, 77 Colum.
L. Rev. 979 (1977) (writing “the courts have no escape
from drawing lines to exclude those damage claims
which escalate defendants’ liability beyond all reasonable
bounds, produce an overkill, compel the courts to engage
in speculation in computing damages, and clog the dockets
with countless litigations. Besides supporting a limited
standing doctrine, these same policy considerations also
undergird the Court’s decisions in Brunswick and Illinois
Brick Co v. Illinois. [emphasis added]”). Therefore, courts
hold that direct-purchaser litigants are only allowed to
bring an antitrust suit, meaning purchasers cannot sue
entities from which they did not directly buy. Kansas v.
UtiliCorp United, Inc., 497 U.S. 199 (1990).
The essential question before the Ninth Circuit was
whether the Respondent, when buying apps, was directly
purchasing the app from the developer or the Petitioner.
Petitioner argued that it does not sell apps but rather
sells “software distribution services” to developers and,
therefore, could not be both a distributor of apps and its
purchaser. The Ninth Circuit dubiously dismissed this

 17
claim by relying solely on the fact that app developers
do not have a store of their own to sell their product.
Put another way, according to the Ninth Circuit, app
developers could only go through Petitioner if they wanted
to sell their apps on the App Store. The court reasoned
that because Petitioner presented the final price and
consumers could only purchase the app through the App
Store, Petitioner was the direct seller. Therefore, the
Ninth Circuit’s logic was that consumers are actually
buying Apple’s iPhone apps as opposed to buying from
a third-party app developer because consumers could
only buy from Petitioner’s App Store when buying apps
on an iPhone; therefore, according to the Ninth Circuit,
Respondent can sue Petitioner under antitrust theory.
The Ninth Circuit’s interpretation of consumers as
direct buyers from the Petitioner in essence categorizes
platform companies as mere resellers of apps; thus,
unjustifiably providing the Petitioner and other platform
companies with ownership rights in developers’ apps to
satisfy its conclusion. Under that interpretation, it would
logically follow that the app developer would not be entitled
to any profit from the consumer when purchased through
Petitioner’s platform because Petitioner would have owned
the app at the time the consumer purchased it off of the App
Store. This is factually inconsistent with the way in which
the app developer and the Petitioner interact. In reality,
within the developer-platform relationship, the Petitioner
is only entitled to the agreed upon percentage of the app
developers’ app fee. Aside from this fee, the Petitioner
has no ownership rights to the app. In addition, platform
owners permit app developers to provide their apps on
platforms not owned by the Petitioner, unencumbered by
the Petitioner. All creative rights solely belong to the app

 18
developer and are uninhibited by the Petitioner. Moreover,
when a consumer agrees to “terms of service” for each
app he or she purchases, the app’s developer maintains
sole responsibility for any breach of those terms. App
developers are also solely responsible for any disruption
in their service because of a lack of integrity in their code,
and the onus rests on them to fix it. Thus, Petitioner is
not a reseller of apps because it is not the owner of any
third-party apps it hosts on its App Store.
Thus, the Ninth Circuit conf lates two distinct
properties to fit its narrative, which confuses the distinction
of the entity from which the consumer purchased the app.
Illinois Brick specifically sought to prevent this type of
conflation by focusing on direct purchasers. However,
the Ninth Circuit’s “functional” test completely sidesteps
Illinois Brick’s critical analysis, forcing this Court to
determine whether, in the face of business and contract
realities that say otherwise, our members are making
apps for Apple or are independent innovators that are
creating apps for their customers: the consumers. As we
demonstrate above, it is unequivocally the latter.
II.  The Ninth Circuit Misapplies Illinois Brick, and
Would Allow Consumers to Interject into the
Platform and App Developer Business Relationship
At the heart of the indirect-purchaser doctrine, the
Court expressed concern of indirect purchasers taking
issue with upstream negotiations and providing them the
ability to object to the negotiated price from upstream
agreements to which they were not a party. Hanover Shoe,
Inc. v. United Shoe Machinery Corp., 392 U.S. 481 (1968)
(involving a shoe manufacturer alleging antitrust harm

 19
against the company directly selling it a machine that, in
part, makes its product and that its “practice of refusing to
sell machines was an instrument of the monopolization.”)
(emphasis added). Key to analyzing this doctrine is to
examine where the direct contractual relationship exists,
put another way: who is selling to whom. See id. This
means that, for purposes of antitrust standing, people
or entities can only sue those companies that have direct
control over the product and its pricing.
The District Court in this case, which the Ninth
Circuit later overturned, accurately held that the Illinois
Brick decision requires a careful evaluation of whether a
plaintiff is claiming a harm based on direct interactions
or pass-through damages. In re Apple iPhone Antitrust
Litig., No. 11-CV-06714-YGR, 2013 WL 6253147 (N.D. Cal.
Dec. 2, 2013), rev’d and remanded sub nom. In re Apple
iPhone Antitrust Litig., 846 F.3d 313 (9th Cir. 2017). We
agree with the District Court’s view that, simply, the court
must evaluate who sets the price. The App Association
also agrees with the District Court’s determination that
“any injury to Plaintiffs is an indirect effect resulting
from the [inf luence of Petitioner’s commission on]
software developers’ own costs,” which could not be
litigated without “speculat[ing] into developers’ pricing
structure, their costs, ability to find a distribution chain,
and/or desired profits or rates of return.” See id. at p. 6.
The Ninth Circuit’s assertion, reached through its selfcreated “functional” test, ignores these considerations
that are integral for a court to determine who is the direct
purchaser of whom for purposes of antitrust standing.
See id.

 20
Unfortunately, the Ninth Circuit’s analysis misapplies
Illinois Brick because it assigns to Petitioner the role
of “distributor” without regard to whether Petitioner
passed along the alleged overcharge and ran afoul to its
precedent. In fact, Delaware Valley Surgical Supply, Inc.
v. Johnson & Johnson—which the Ninth Circuit relies on
heavily—demonstrates this point. In Delaware Valley,
the distributor, Owens & Minor (O&M), negotiated the
price paid to the producer. 523 F.3d 1116, 1122-23 (9 th Cir.
2008). The Ninth Circuit in that case held that Bamberg
Memorial Hospital (Bamberg) was not a direct purchaser
of products from Johnson & Johnson because Bamberg
paid O&M—a medical device distributor—directly and
was, thus, its customer for purposes of antitrust standing.
See id. at 1122. The Ninth Circuit went on to say that
O&M was Johnson & Johnson’s customer, because O&M
purchased the products from it directly. Therefore,
Bamberg could not sue Johnson & Johnson under section
4 of the Clayton Act because it had no contractual
relationship with Johnson & Johnson in the context of the
medical devices O&M sold to it. The key factor in this case
was with which entity did the buyer contract.
The Ninth Circuit in this case explicitly ignores any
distinction between the facts in Delaware Valley and
the case at bar. In fact, the panel goes out of its way to
acknowledge that app developers set their price, but then
proceeds to say that it is irrelevant to its direct-purchaser
analysis without elaborating as to why it is irrelevant or
how Delaware Valley makes it irrelevant. See In re Apple
iPhone Antitrust Litig., 846 F.3d 313, 329 (9th Cir. 2017).
Confusingly, it states later that, “[The panel] do[es] not
address the question whether Apple sells distribution
services to app developers within the meaning of Illinois

 21
Brick.” See id. at 330. This is absolutely baffling because
these two factors are precisely what distinguishes the
facts of this case from that of Delaware Valley. Mostly
because these two factors place the consumer as the app
developer’s direct customer not Petitioner’s as we explain
below.
In this case, app developers, like our members, set
the price of their apps and pass through the cost of the
Petitioner’s distribution service to their consumers. In
Delaware Valley, O&M’s role as a price negotiator is key to
the analysis because the only reason for such a Clayton Act
complaint in the first place is the price itself. In the instant
case, Petitioner passes on the cost of the app. The factors
at play leading to the decision to set an app’s price—
for example, labor, intellectual property, Petitioner’s
commission, and demand—are outside Petitioner’s scope
and entirely subject to the app developer’s judgment. It
is clear from their initial complaints at the District Court
level that the parties at bar take issue with our members’
pricing of their products and terms within their almost
ten-year negotiation with Petitioner (i.e., Petitioner’s 30
percent charge). In re Apple iPhone Antitrust Litig., No.
11-CV-06714-YGR, 2013 WL 6253147, at 1-2 (N.D. Cal.
Dec. 2, 2013), rev’d and remanded sub nom. In re Apple
iPhone Antitrust Litig., 846 F.3d 313 (9th Cir. 2017);
see also, ACT   The App Association, The Symbiotic
Relationship Between App Developers and Platforms:
A Ten-Year Retrospect, Website (last checked, August
7, 2018). Available at: http://actonline.org/wp-content/
uploads/2018_ACT-App-Store-Ten-Year-Retro-Doc.pdf.
To offset the costs of running its App Store, the
Petitioner issues a 30 percent fee on apps that have an

 22
upfront subscription or in-app purchases. For each year
thereafter, the Petitioner lowers its fee to 15 percent,
yielding an 85 percent profit for the app developer. See
App Store Guidelines. Outside of the App Store, however,
app developers can collect 100 percent of their profits
from sales or subscriptions, See id.; but their sales are
often lower because it is difficult to reach the same
volume of consumers outside of a large, centralized app
platform. Hugo Delgado, The App Economy Forecast:
A $6 Trillion Market in the Making, App Annie (2017)
Available at: http://bit.ly/2xfDqtB (reporting that global
mobile commerce is outpacing other forms of monetization
and growing at a 38% compound annual growth rate).
App developers can also offer their products free of
charge if they so choose. See App Store Guidelines. In
fact, roughly 90 percent of apps made available on the
App Store platform are free. See Distribution of Free
and Paid Apps in the Apple App Store and Google Play
as of 1st Quarter 2018, Statista (last checked Jul. 11, 2018)
available at: https://www.statista.com/statistics/263797/
number-of-applications-for-mobile-phones/; see also,
Sarah Perez, Paid Apps on the Decline: 90% of iOS Apps
Are Free, Up From 80-84% During 2010-2012, Says
Flurry, TechCrunch (Jul. 18, 2013), https://techcrunch.
com/2013/07/18/paid-apps-on-the-decline-90-of-ios-appsare-free-up-from-80-84-during-2010-2012-says-flurry/.
In this case, the Respondent seeks to object to terms our
members have with Petitioner and refuse to acknowledge
that the various pricing structures our members offer on
Petitioner’s platform.
If the Court accepts the Ninth Circuit’s interpretation,
then it is endorsing the idea that consumers can object
to terms from upstream negotiations, having one of two

 23
effects for our member companies: (1) to mitigate the threat
of consumers suing platform companies for prices of apps,
platform companies will engage in setting the price for our
member companies’ products or at least want more control
over that aspect of their business models; or (2) platforms
will not impose their nominal fees and, by extension, the
services that come with it. See Supra I.A.1-4. The former
situation would force app developers to release control
over how they price their products. However, the latter
produces losers at each stage because app developers
would then have to absorb the exorbitant overhead costs
they experienced before the advent of mobile platforms.
See id. In either scenario, these results could yield fewer
choices and higher prices for the consumers buying apps
on mobile platforms, Petitioner’s included.
As stated before, the court in Delaware Valley did not
make this mistake and neither should this Court in the
instant case. If Illinois Brick has any meaning, courts
must avoid blindly categorizing an entity as a “distributor”
that antitrust plaintiffs can sue without more deeply
considering the distributor’s role. Thus, the Court should
overturn the Ninth Circuit’s mistake here.

 24
Conclusion
For the aforementioned reasons, we respectfully ask
the Court to overturn the Ninth Circuit’s decision in this
case.
Respectfully submitted,
Brian Scarpelli
Counsel of Record
Joel Thayer
ACT   The A pp A ssociation
1401 K Street, NW, Suite 501
Washington, DC 20005
(517) 507-1446
bscarpelli@actonline.org
jthayer@actonline.org
Counsel for Amicus Curiae