Apple should sue Gizmodo over stolen iPhone prototype

Gizmodo was wrong to acquire a lost iPhone prototype -- quite likely a nearly finished version 4 design -- let alone pay to obtain it. Perhaps this marks the distinction between bloggers and journalists. I would have contacted Apple about returning a device so obviously stolen. There is grave difference between obtaining secret information for the public good and what Gizmodo did: Obtain property containing trade secrets belonging to a public company. Gizmodo has violated the public trust and broken the law. Free speech isn't a right to pay freely for something clearly stolen.

I typically reserve this kind of treatise on journalistic ethics for my Oddly Together blog, where in late March I posted "The Difference Between Blogging and Journalism." Betanews founder Nate Mook asked me to write something here about the journalistic and legalistic ethicacy of Gizmodo's actions. I simply couldn't refuse.

Earlier today, long-time Mac journalist Jim Dalrymple and I discussed the story. I asserted then, as I will here, that Gizmodo broke the law by obtaining stolen property and, related, by paying for an unreleased Apple product that disclosed trade secrets. The latter violates good journalistic practice, at the least.

Gadget geeks' desire to know doesn't supplant a company's right to protect millions of dollars invested in developing a product or preventing millions of dollars lost by the leakage of product designs or plans to competitors. Gizmodo did more than cross the line here. The blog lept a chasm no less wide than the Grand Canyon. The legal ramifications could, and quite probably should, be as deep.

The flow of events isn't complicated to follow:

1. On March 18, someone left in a bar what later appeared to be a next-gen iPhone prototype or near-finished device.

2. Someone else stole the device. Stolen is appropriate description because the device had been left in a public place -- presumably by accident -- and clearly belonged to someone else.

3. Gizmodo obtained the stolen smartphone by paying cash  for it; Gizmodo's Jason Chen got access to the device around seven days before posting information about it.

4. Today, Gizmodo posted pics and videos and offered some device teardown that reveals to competitors much about Apple's plans for the next-gen iPhone.

5. The phone's seller sought to profit from the sale of the stolen property, while Gizmodo sought to profit from the pageviews that photos, videos and blog posts would generate.

[Editor's Note: This post presumes that the iPhone prototype is the real thing and not a fake.]

A Clear Case of Theft

There are two primary questions regarding Gizmodo's actions. Did it break the law and did it violate good journalistic prudence -- assuming anyone would apply ethics to a new media blog. Let's start with the trade secrets.

California's "Uniform Trade Secrets Act" is unambiguous, partly defining "trade secret" as "information, including a formula, pattern, compilation, program, device, method, technique, or process." The Act uses several definitions of "misappropriation," of a trade secret with one being: "Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means."

An unreleased phone accidentally left in a bar and sold to Gizmodo surely qualifies as acquisition "by improper means." Proper means would be purchase of the device from Apple, following its public release. What about theft? According to Section 485 of the California Penal Code:

One who finds lost property under circumstances which give him knowledge of or means of inquiry as to the true owner, and who appropriates such property to his own use, or to the use of another person not entitled thereto, without first making reasonable and just efforts to find the owner and to restore the property to him, is guilty of theft.

There's nothing unambiguous about that. According to Gizmodo, Apple software engineer Gray Powell accidentally left the iPhone on a bar stool. The person later obtaining the device sat next him. By my reading of the law, the finder is guilty of theft and likely so is Gizmodo by paying for the Apple smartphone. Estimates range between $5,000-$10,000, but who knows?

Yellow Blogging

Gizmodo is part of the Gawker family of, arguably quite successful, Weblogs. On his twitter page, Gawker publisher Nick Denton's bio reads: "Gossip merchant," which says much about the news philosophy behind Gizmodo and other Gawker properties. In a Denton memo to employees last week, he wrote: "The staples of old yellow journalism are the staples of the new yellow journalism: sex; crime; and, even better, sex crime. Remember how Pulitzer got his start: http://en.wikipedia.org/wiki/Yellow_journalism." I call its reincarnation "yellow blogging," as gossip and rumor blogsites ruthlessly compete for pageviews -- such as the well-publicized competition between Engadget and Gizmodo.

In the memo, Denton outlined eight attributes that drive pageviews: "Scandal sells"; "the pseudo exclusive"; "drama"; "visuals"; "explainers"; "don't rubbish the headline"; "parody"; and "inside baseball." So far, the stolen iPhone story has seven -- eight, if I missed parody somewhere. Gizmodo has carefully unfolded the story, like today's "How Apple Lost the Next iPhone," over several posts, with supporting pics and videos. Clearly the goal is to maximize pageviews, which have topped 3 million perhaps on their way to 5 million or more.

In many ways, this post isn't easy for me to write. I highly respect Denton for his success managing Gawker through the economic downturn and bringing back some of the drive to break stories. But there's breaking news and breaking the law. It's not like Gizmodo turned up a whistleblower revealing that iPhone causes brain cancer or that Apple uses 8 year-old boys on the manufacturing line. It's the difference between what does and does not qualify as free speech or the free press.

According to the California Uniform Trade Secrets Act:

Nothing in this section shall be construed to limit, restrict, or otherwise impair, the capacity of persons employed by public entities to report improper government activity, as defined in Section 10542 of the Government Code, or the capacity of private persons to report improper activities of a private business.

Nowhere does the Act say that journalists may "misappropriate" trade secrets for personal or company gain.

An Ethics Lesson

Tech pundit Andy Ihnatko put the right ethical and legal response in the right perspective in a blog post earlier today:

I would have thought very hard and then gone with my first impulse: return the phone to Apple. If it's been stolen, then Apple is the victim of a crime and the ethical answer is to side with the victim...If I was told that this phone had been found in a bar, I would have assumed that it had been stolen from Apple. Same result. And if the 'finder' wanted some sort of fee for this device, then I would have brought law enforcement into the discussion.

That kind of situation is so shady that no journalist with an ounce of sense would come anywhere near it. Even if you could get past the professional ethical dilemma and your ethical dilemma as a human being -- look, smart people aren't confused about how to react when someone tries to hand them a knife wrapped in a torn and bloody UPS uniform and asks them to hide it for a couple of weeks. I don't mind these problems that you have to discuss with your editor. But I try to avoid the sort of problems that result in a conversation with a criminal defense attorney.

I wholeheartedly agree. But I fall on my ethics as a Roman might fall on his sword. I'm a lowly freelance journalist. Yellow blogging is where the money is. That said, justice may come in the form of Apple's retribution. Today at TechCrunch, MG Siegler appropriately stated Gizmodo's legal situation:

It may be the most high-profile hardware leak of all time from any company. If there has ever been anything that will draw the wrath of Apple's legal team, this would seem to be it. And yet, if Gizmodo (or its parent, Gawker) have gotten a take-down notice, they haven't let it be known yet. It's possible, and likely even probable, that Apple is taking this as something worthy of action much more serious than the fairly common takedown notices the company sends from time to time.

Apple may have plenty of legal recourse. According to section 3426.3 of the California Uniform Trade Secrets Act:

A complainant may recover damages for the actual loss caused by misappropriation. A complainant also may recover for the unjust enrichment caused by misappropriation that is not taken into account in computing damages for actual loss.

Apple has sued over stolen trade secrets before, such as one lawsuit in 2004 against an "unknown individual" for leaks related to the Power Mac G4 Cube. In 2005, Apple sued several bloggers over release of trade secrets. The resulting settlement led to rumor site ThinkSecret's closure. Surely, Apple would and should take action against the "most high-profile hardware leak of all time from any company."

Denton is a new media mogul and cult personality in his own right. Steve Jobs and Apple may find Denton and Gawker to be formidable opponents. Perhaps that's the win-win Denton sees. He gains scads of pageviews from the iPhone leak, while with a lawsuit opportunity to publish an ongoing blow-by-blow account about the Apple legal skirmish. If there was ever going to be a truly public Apple legal battle, Gawker would be it. Who says blogging doesn't pay?