Yesterday a "personal property damage' lawsuit was filed against Apple in the California Northern District Court. The lawsuit will try to convince the judge to grant it Class Action status. The complaint states that "This is a consumer class action brought by Plaintiff on behalf of herself and all others similarly situated who owned an Apple iPhone 4 or iPhone 4S that was operating on iOS 6 or an earlier operating system, and therefore lost the ability to use Apple's 'FaceTime' video conferencing feature when Apple intentionally broke FaceTime for iOS 6 and earlier operating systems on April 16, 2014.

Nature of the Action In-Part

The following is the 'Nature of the Action' as presented to the court in-part against Apple:

Apple Chief Executive Officer ("CEO") Tim Cook ("Cook") has described the iPhone as "one of the most important, world-changing and successful products in history." Since introducing the iPhone in 2007, Apple has sold more than one billion units.

All iPhones operate through Apple's proprietary "iOS" operating system, which is the software that controls the device's functions and operations.

FaceTime is Apple's immensely popular real-time video messaging and chat feature that enables FaceTime users to engage in real-time video (and audio) communications. FaceTime is proprietary to Apple products and therefore users can only communicate via FaceTime with Apple products. Since first releasing FaceTime in 2010, Apple has heavily marketed the feature's ability to close the gap between friends and loved ones separated by great distances, particularly at life's most meaningful milestones. Apple heavily touted FaceTime as a centerpiece in the company's advertisements for the iPhone 4 and iPhone 4S. In the years following its release, FaceTime became one of the most popular and valued iPhone features. Indeed, at Apple's 2013 annual stockholders' meeting, CEO Cook revealed that fifteen to twenty million FaceTime calls were made on a daily basis.

There are two types of ways that participants in a FaceTime call can exchange audio/video media: (1) the so-called "peer-to-peer method," where a direct connection is formed between the caller and the callee; and (2) the so-called "relay method," where the caller and the callee connect to a relay server that relays the data on behalf of the devices. During the period relevant to this action, the servers used by Apple for relaying FaceTime calls were owned by a company called Akamai Technologies, Inc. ("Akamai"). Unlike peer-to-peer FaceTime calls, Apple made significant payments to Akamai for "relay usage" (i.e., bandwidth) on Akamai's servers.

Prior to November 7, 2012, approximately 90-95% of FaceTime calls were connected through the peer-to-peer method, and only 5-10% through the relay method. Thus, Apple's relay usage—and the expense to Apple arising therefrom—were relatively low.

On November 7, 2012, however, a jury found that Apple's peer-to-peer method of connecting FaceTime calls infringed on patents held by VirnetX, Inc. ("VirnetX"). The only way for Apple to avoid knowingly and intentionally continuing its infringement on VirnetX's patents was to shift 100% of FaceTime call volume to the relay method.

Upon shifting 100% of FaceTime call volume to the relay method, Apple's relay usage soared. As a result, Apple began to incur multi-million dollar monthly charges for its use of Akamai's servers. Therefore, as internal Apple emails reveal, Apple undertook a concerted effort to find a way to reduce its relay usage by reducing the volume of FaceTime calls connected through the relay method. Indeed, an internal Apple email chain circulated during this time period bore the subject "Ways to Reduce Relay Usage," and explored potential strategies for doing so.

On September 13, 2013, potential relief from Apple's high relay usage fees arrived. On that day, Apple introduced iOS 7, a next generation operating system that could connect FaceTime calls through the peer-to-peer connection method in a way that had not yet been found to infringe on VirnetX's patents. The introduction of iOS 7 therefore helped Apple reduce its relay usage and the resultant payments from Apple to Akamai.

More than seven months after the introduction of iOS 7, however, millions of Apple users' devices still operated on iOS 6 or earlier operating systems and thus could only be connected via FaceTime through the relay method. Because of this, Apple was still amassing significant relay usage and, therefore, facing substantial payment obligations to Akamai.

Consequently, to further reduce its relay usage costs, Apple devised a scheme to force millions of its users—i.e., users running iOS version 6 and earlier—to stop using FaceTime on their devices. As Apple's internal emails and sworn testimony at the VirnetX trial revealed, Apple formulated a plan by which its engineers caused a digital certificate necessary to the operation of FaceTime on iOS 6 or an earlier operating system to prematurely expire. Upon the expiration of that certificate, and as a direct result of Apple's actions, the valuable FaceTime feature immediately and abruptly stopped working for millions of users running iOS 6 or an earlier operating system (the "FaceTime Break"). To regain FaceTime capability, those users had to either transition to iOS 7, or buy an entirely new Apple device with iOS 7 preinstalled.

Apple did this knowing that for millions of users, moving to iOS 7 was highly problematic because it was essentially incompatible with certain Apple devices. For iPhone 4 and iPhone 4S users, for example, the coerced move to iOS 7 subjected their devices to slowness, system crashes, erratic behavior and/or the elimination of their ability to use critical functions on their phone. As succinctly stated in one of the media reports that discussed these widespread functionality problems, "[t]he older handsets buckle under the weight of the new software." Thus, for millions of Apple's customers, a move to iOS 7 would significantly harm the functionality of their device.

Internal Apple emails eliminate any doubt that Apple intentionally broke FaceTime, and did so in order to reduce relay usage and the high costs related thereto. For example, weeks or months after the FaceTime break, Apple engineering manager Patrick Gates ("Gates") sent the following email to various Apple personnel: "Hey, guys. I'm looking at the Akamai contract for next year. I understand we did something in April around iOS 6 to reduce relay utilization." Apple engineer Gokul Thirumalai responded to Gates, stating the following: "It was a big user of relay bandwidth. We broke iOS 6, and the only way to get FaceTime working again is to upgrade to iOS 7."

Following the FaceTime Break, millions of iPhone 4 and iPhone 4S users whose devices were operating on iOS 6 or an earlier operating system faced two options for continuing to use their device: (1) remain on a pre-iOS 7 operating system, but without the ability to use FaceTime; or (2) transition to iOS 7, and accept the significant reduction in functionality that their iPhone would suffer as a result. To quote the colorful language used by an Apple employee in an internal Apple email sent within hours of the FaceTime Break, as a result of the break "our users on [iOS 6] and before are basically screwed[.]" (Emphasis added by plaintiff.)

Plaintiff brings this action on behalf of herself and all other similarly situated consumers who, at the time of the April 16, 2014 FaceTime Break, owned an iPhone 4 or iPhone 4S that was running on iOS 6 or an earlier operating system, and who therefore lost the ability to use FaceTime on their device. Plaintiff alleges trespass to chattels and violations of the Unfair Competition Law, California Business and Professions Code §17200, et seq. (the "UCL").

The First Cause of Action against Apple: Trespass to Chattels Under California Law

The Second Cause of Action against Apple: Violation of California's Unfair Competition Law California Business and Professions Code §17200, et seq.

The case was filed in the California Northern District Court yesterday February 2, 2017. The judge assigned to this case is Nathanael M. Cousins

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