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The ‘app store’ before there was an App Store wants to liberate your iPhone … again

Cydia, one of the first app stores on iPhone, is suing Apple, alleging anti-competitive behavior

(Matthias Schrader/AP)
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A new lawsuit brought by one of Apple’s oldest foes seeks to force the iPhone maker to allow alternatives to the App Store, the latest in a growing number of cases that aim to curb the tech giant’s power.

The lawsuit was filed on Thursday by the maker of Cydia, a once-popular app store for the iPhone that launched in 2007, before Apple created its own version. The lawsuit alleges that Apple used anti-competitive means to nearly destroy Cydia, clearing the way for the App Store, which Cydia’s attorneys say has a monopoly over software distribution on iOS, Apple’s mobile operating system.

“Were it not for Apple’s anticompetitive acquisition and maintenance of an illegal monopoly over iOS app distribution, users today would actually be able to choose how and where to locate and obtain iOS apps, and developers would be able to use the iOS app distributor of their choice,” the lawsuit alleges. The lawsuit was filed in federal court in Northern California and Cydia is represented by Quinn Emanuel Urquhart and Sullivan.

Apple is facing an onslaught of lawsuits and scrutiny from lawmakers and regulators around the world for the way it allegedly uses its power to maintain its dominant position over its App Store. Epic Games, the maker of “Fortnite,” sued Apple in August for allegedly monopolistic behavior, and a coalition of software developers taking on Apple’s power has been growing in membership. Apple is facing investigations in Europe, spurred by music streaming service Spotify and other competitors, over allegedly anti-competitive behavior. And in the United States, lawmakers scolded Apple and its peers in a report on the power of large Silicon Valley companies.

Apple spokesman Fred Sainz said the company will review the lawsuit and denied that the company is a monopoly. It says it faces competition from Google’s Android operating system, which is used by competing handset makers like Samsung and Google itself. And Apple says it must tightly control the way software is installed on the iPhone to protect its customers from inadvertently downloading viruses and other security threats and from installing apps that invade its customers’ privacy.

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The Cydia lawsuit represents a new kind of challenge to Apple’s power. While Epic, Spotify and other companies say they are victims of Apple’s alleged App Store monopoly, they aren’t direct competitors to the App Store itself. Cydia, which was popular in the early days of the iPhone, offers a real-world example of what competition might look like.

The App Store has been a huge success for Apple, generating around $15 billion a year in revenue, according to analysts’ estimates. While the sum represents only a small portion of the company’s roughly $275 billion in total revenue, it has become an important springboard for the company’s fast-growing services business, which could help the company through slowing growth of iPhone sales. Apple generally takes a 30 percent cut of revenue earned by app developers on its platform.

The App Store’s success has come least in part because of the way it controls the software on iPhones and iPads. Unlike the company’s Mac computers, which allow customers to install software in a variety of ways, including via the Mac App Store, other competing app stores and directly from websites, the iPhone’s software prohibits all methods of software distribution except one: the Apple App Store.

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Apple must approve every app that is available for the iPhone, and software developers must abide by a long list of rules that define exactly what an iPhone app can and can’t do.

It wasn’t always that way. Jay Freeman was consulting as a software developer in Santa Barbara, Calif., when the iPhone launched in 2007.

When a colleague bought Freeman an iPhone, he tested it out and was at first disappointed, he said in an interview. The phone lacked features like cutting and pasting text, and the ability to send text messages to more than one person at a time. The iPhone offered no way for its owners to install new software, such as games or alternative Web browsers.

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Still, the iPhone’s potential as a truly mobile, Internet-connected computer had quickly captured the attention of software developers who began tinkering with it. One of Freeman’s friends convinced him that, instead of complaining about the iPhone’s lack of software, he should get to work and create software of his own.

Freeman quickly found himself at the center of a burgeoning community of developers building new features atop the iPhone. Those additions required removing software barriers on the phone so that new applications would run on the operating system, much like a traditional computer. The act of getting past the phone’s restrictions in this way became known as “jailbreaking.”

Freeman wanted to make jailbreaking and installing new software easy, even for customers with little technical knowledge. The effort resulted in Cydia, an app store where customers could install games and features, including the ability to cut and paste text.

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Freeman said that Cydia, which he named after an agricultural pest that affects fruit crops, was an immediate hit. There were so many people using it that he estimates half of early iPhone customers must have been “jailbreaking” their phones to take advantage of the additional features it offered. In 2010, Freeman told The Washington Post that Cydia had 4.5 million people searching for apps every week.

In 2008, Apple came out with its own version, called simply “The App Store.”

Apple also began adding additional protections to the phone’s operating system and warning its customers that jailbreaking their phones could put them at risk of security vulnerabilities. Sainz reiterated the warning in a statement Thursday. Freeman said he remembers seeing physical signs in Apple retail stores with such warnings. Freeman says the security risks are overblown. Such downloads are similar to those on a PC, which could include software that invades a user’s privacy or gathers their data. And even Apple-approved apps can expose customers to privacy risks.

“Morally speaking, it’s your phone and you should be able to do whatever you want with it,” Freeman said. “You should get to decide which applications you put on it, and you should be able to decide where you get those applications from.”

In 2009, the U.S. Copyright Office established that jailbreaking was not an illegal activity, after Apple argued that it violated the law.

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“The ability of people to jailbreak and put their own software on devices is an important one that has allowed people to do a lot of cool and interesting things,” said Kurt Opsahl, deputy executive director and general counsel of the Electronic Frontier Foundation, a nonprofit technology advocacy group that helped gain the legal exception for jailbreaking. Opsahl said that, with only one app store to install software on iPhones, he’s concerned about whether the process for installing apps is fair. “How are they going to use that monopoly power?” he asked.

After losing its argument in front of the Copyright Office, Apple continued its attempts to stop Cydia. It made jailbreaking more difficult by adding more barricades against outside software being installed on the phone. At the same time, Apple added new features that had previously been available on Cydia. Apple’s Control Center, its bubble notifications and the ability to immediately respond to text messages on the home screen all originated on Cydia.

According to the lawsuit, Apple used “coercive” terms to try to prevent Apple customers from using Cydia or any alternative means to install software and discouraged developers from using services like Cydia.

Cydia’s revenue peaked in 2011 and 2012, when it brought in about $10 million, Freeman said. Cydia, like Apple, charged Apple developers a commission on sales. In 2013, as Apple’s own App Store gained more power and prominence, Cydia’s business began to dry up.

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Apple also began hiring former “jailbreakers” to work on its security team. Freeman said some of those people were his friends, and he said those discussions were awkward. “When Robin Hood is willing to go work for the sheriff of Nottingham because they have cool crossbows, it’s like, ‘What were you doing?’ ” he said.

Jailbreaking an iPhone has become so difficult that many in the jailbreaking community have essentially thrown in the towel and moved on, and some have declared the practice essentially dead.

Freeman is still working in software development but spends less time on Cydia, which still exists but is far less popular than it once was. He is head of technology for a privacy software company called Orchid and he is an elected official in California, serving on the board of the Isla Vista Community Services District in Santa Barbara County.

Freeman’s attorneys at Quinn Emanuel, the same law firm that represented Samsung in its blockbuster patent war with Apple, say that now is finally the time for Cydia to take on Apple in court.

“The legal climate for this claim has been changing,” said Stephen Swedlow, the lead attorney for Cydia. Swedlow said he’s been watching other lawsuits, including the one filed by Epic, and he believes Cydia could be the “perfect claimant” for an antitrust case against Apple. Swedlow said that if the suit is successful, Cydia would aim to once again compete with Apple, this time without the need for jailbreaking.

Swedlow filed an antitrust case against Facebook last week on behalf of people who use the social network, and Quinn Emanuel is representing Blix, a maker of email software, in another antitrust case against Apple, which was recently dismissed in federal court.

Other lawsuits point out that Apple has no competitors when it comes to iOS app distribution. But Cydia was that competitor, Swedlow says. And it had millions of followers. Then, he said, Apple took anti-competitive measures to snuff Cydia out.