Why Can't Apple Just Drop the 'Leaked' iPhone 4G Inquiry?

Lora Bentley
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Last week the judge who issued the search warrant for Gizmodo blogger Jason Chen's home office unsealed the supporting affidavit at the request of Gizmodo parent company Gawker Media and several other media organizations.


According to Channel Web, the search warrant authorized seizure of evidence relating to theft or vandalism of the iPhone prototype, as well as "to buying or receiving stolen property." All of those offenses are felonies.


The documentation also reveals Detective Matthew Broad applied for the warrant based on information given to him by Apple representatives. They claimed at the time that loss of the iPhone 4G prototype and the subsequent release of photos and details about the device were "immensely damaging" for the company because sales of current versions of the iPhone would fall off as customers wait for the new version to be released.


Interestingly, though, in a Channel Web story posted just Monday writer Andrew Hickey takes issue with that claim. And I agree with him. He says:

Apple buyers and consumers know a new iPhone will hit in the summer of 2010. They've known it since they plunked down the dough for a 3GS. That's how Apple works. For Apple to claim that early details of its latest smartphone creation leaking to the public will have a "huge" negative impact current sales is short-sighted.

Hickey then points to iPad sales numbers as an example of the company's "sales prowess" and urges Apple to look at the leak as free advertising rather than a threat to its empire. (Besides, if President Obama's recent quip that iPhones and iPads are bad for democracy doesn't even warrant a response, why do a few pictures and a description of the coming iPhone's features require a criminal investigation?)


It's great advice, considering you can't put the cat back in the bag, but I doubt Apple will take it. The powers that be in Cupertino love control too much for that.

Add Comment      Leave a comment on this blog post
May 18, 2010 1:00 AM tj tj  says:

SOoyour saying its ok to buy stolen property and destroy it?

May 18, 2010 1:33 AM Erin Erin  says:

Release the phone already. Everyone wants it. Apple is acting like a spoiled brat.

May 18, 2010 1:57 AM Rich Rich  says: in response to Erin

If you read the full affidavit, you'll see that Jason Chen is facing 3 potential felonies.  This doesn't even address the crimes committed by the seller (selling stolen property, concealing evidence), and a possible extortion charge by Gizmodo editor Brian Lam (email to Steve Jobs). 

Trade secrets are called secrets for a reason, and Apple has a right to retain those until they see fit. 

To allow this case to go unpunished sets a dangerous precedent to any company who spends a lot of money developing products, by allowing journalists to commit crimes, then hide behind shield laws, which were never intended to shield anyone from criminal prosecution in the event that the law was broken.

May 18, 2010 2:16 AM Jay Jay  says: in response to tj

The iphone in question was not stolen, it was lost.  Selling an item that was found is not against the law.

Brian, I am not a tech guy but even as an average joe I know that Apple has released a new version of iphone every year since it came out.  It is no suprise to pretty much anyone that a new iphone would more than likely be coming out again this year especially since they only make little improvements each time to keep you coming back for more.  I have an iphone 3g and am able to upgrade to a 3gs but I have not because as any person who really wants or likes an iphone I know that the chances are really great that a new one was coming out.  Just a little note for the future, if you ever have an iphone and your upgrade comes up anytime close to June, wait it out and you will see there will more than likely be a new one out shortly that has more features.  That is pretty much any companys MO...to make more money by enticing you to upgrade more often than you need to.

May 18, 2010 2:36 AM Mike Mike  says: in response to Brian Ford

If you don't know a new iphone is coming in June then you are making purchases without doing any research whatsoever and you deserve whatever you buy. Apple has released a new model every single year in June since inception!

May 18, 2010 2:58 AM Landon Landon  says: in response to Jay

Jay it is against the law in California:

Section 2080 of the Civil Code provides that any person who finds and takes charge of a lost item acts as "a depositary for the owner." If the true owner is known, the finder must notify him/her/it within a reasonable time and "make restitution without compensation, except a reasonable charge for saving and taking care of the property." Id. 2080.  If the true owner is not known and the item is worth more than $100, then the finder has a duty to turn it over to the local police department within a reasonable time. Id. 2080.1.  The owner then has 90 days to claim the property.  Id. 2080.2. If the true owner fails to do so and the property is worth more than $250, then the police publish a notice, and 7 days after that ownership of the property vests in the person who found it, with certain exceptions. Id. 2080.3.

May 18, 2010 2:59 AM Rich Rich  says: in response to Jay

>>The iphone in question was not stolen, it was lost.  Selling an item that was found is not against the law.

It is theft, and it is against the law.  The law requires you to return it to the owner if you know who they are, or surrender it to the police.  In this case, the finder knew who the person was who left it (via Facebook on the phone) and knew it was an Apple prototype, yet didn't make a significant effort to return it to either, and shopped it around for profit instead.  That's why this is a story.

Regardless of whether or not anyone assumed that a new phone is coming out, Apple having their IP posted on the internet as well as having one of their prototypes damaged is a big deal.

Lora - your credentials show that you have a legal education.  I would certainly expect a different opinion from you, rather than a weak opinion based off another blogger's thoughts.

May 18, 2010 3:01 AM Paul Paul  says: in response to Jay

What kind of idiot thinks a found item can be sold legally anywhere.  Remember not to use this IT guy for anything.  He will be selling stuff in your business claiming he found it.

What a nut!  Doesn't know the law but yaks about it.

May 18, 2010 3:55 AM lazlaw lazlaw  says: in response to Jay

It most assuredly is a crime to sell property you find, unless you have complied with laws goerning found property.

May 18, 2010 4:28 AM Lazlaw Lazlaw  says:

Chen claims Hogan 'found' the prototype iphone in March. Neither of them complied with Civil Code 2080 et seq. which require a finder to turn found property over to the true owner or to the police, if the true owner is unkown. Everyone knew they had a valuable Apple prototype, that Apple owned it, and it was Apple's trade secret -- which gets special legal protection. The "sale" compounded the felony as did the letter from Lam to Jobs trying to extort favors for Gizmoto. The Shield Law is a red herring. Bad legal advice is no defense. If the law can't protect Apple's property, what is your propety worth? 

May 18, 2010 9:50 AM Walt French Walt French  says:

@Lora said, "Broad applied for the warrant based on information given to him by Apple why do a few pictures and a description of the coming iPhone's features require a criminal investigation?"

Well, I guess you must live in some Nirvana jurisdiction where the police always know everything about stolen property even without the victim's complaint! And due to having such a blissful existence, not really able to read the warrant to recognize that it was about very real crimes that only sociopaths would condone: theft (both physical and trade secrets), selling stolen goods and destruction of property. To this non-lawyer, it looks like a pretty straightforward example of decent police action to collect court-worthy evidence in the face of a flagrant violation of law.

The stuff we've seen in defense of the perps actually looks worse than what's in the warrant: if they were handed the phone by yet another person who thought it was the perps', then they arguably committed fraud in taking possession of it.

The clowns who make bald-faced, totally false assertions (such as @Jay, above) are not likely to really be interested in "Governance and Risk," while those of us who DO have risk responsibilities can only use this article as an example of bad advice that floats around. At worst (for you), it is a reminder to never waste our time here looking for advice or au courant ideas or trends in the legal & risk arena.

Given the overwhelmingly disturbed responses to your spectacular mischaracterization of the law broken and gravity of it by people who seem to be thinking responsibly, might you consider retracting or reconsidering the remarks as the antithesis of "Governance and Risk" ?

Happy blogging!

May 18, 2010 10:35 AM James Katt James Katt  says:

Apple has no power to drop the inquiry.

Once Apple said the iPhone was stolen (and it was stolen per California Law), it becomes a police and district attorney matter.  Apple has no control once this is done.  The police will continue to obtain evidence. And the district attorney will be the one to decide who to charge with a crime.

Additionally, all the bloggers like you are perpetuating this story ad infinitum, ad nauseam.  Apple hasn't publicly made any statement about the crime other than to report it to the police.  It is the bloggers who are making the biggest stink about it, not Apple.

Be that as it may, there will be some people to hang:  The thief, his accomplice, the two Gizmodo editors.  They are all facing multiple felony charges including grand theft, obstruction of justice (hiding evidence - what got Martha Stewart 5 years in prison), sale of stolen property, receiving stolen property, conspiracy to commit a crime, trade secrets law violation, and extortion.

Hang them high.

May 18, 2010 12:44 PM Brian Ford Brian Ford  says:

>Apple buyers and consumers know a new iPhone will hit in the summer of 2010.

This simply isn't accurate. If I had a dollar for every person I know who currently owns an iPhone, and who is looking to upgrade, and have to be told "wait until June, a new iPhone is coming" I'd be able to purchase a new iPhone in June. You tech pundits seem to assume "the average person" (even a consumer who buys apple products) follows Apple news and sales trends in an effort to make purchasing decisions. It's not a claim that I've ever seen backed up by evidence. Bluster, yes. Evidence, no.

The author you cite is making a flawed argument. Apple never says they won't still sell a ton of iPhones, leak or no, they say they'll sell fewer. It's possible to sell a lot but not sell as many as you could.

>Besides, if President Obama's recent quip that iPhones and iPads are bad for democracy doesn't even warrant a response, why do a few pictures and a description of the coming iPhone's features require a criminal investigation?

That's just silly. Obama's "quip" didn't involve possible criminal activity. Gizmodo's actions (and Chen's, in particular) did.

Did you read the affidavit?

May 19, 2010 7:59 AM Walt French Walt French  says: in response to Michael Jones

@MJ said, "Sadly, Apple has turned into nothing but rotting fruit. Their copyright case against HTC (and indirectly Google and Microsoft) is another pissing contest initiated by Apple with it's [sic] only intention being to stir up public support and get free publicity."

@MJ, thanks for sharing your insights.Although they're not blindingly stupid like others above, where they're not junk, they're allegations without supporting evidence or pontifications on how you would run the most successful company on the planet better than the current management.Good luck with anybody believing that!

As to the PR allegation:bunkum.Apple gets free publicity whenever it wants, even if Jobs is just seen having coffee.Seeking PR in a way that troubles many people (such as yourself) would be about 4 notches down the scale that people usually expect out of Apple.

Meanwhile, there's a much more likely explanation:Apple wants to use its Intellectual Property - you know, those innovations that you say it needs - to stay up in the game.It's pretty hard to compete if you give away all your R&D.

I predict that 2010's biggest tech story will be Apple's efforts to withstand the Android tidal wave.That story looks a whole lot like the nearly fatal beating that Apple took at the hands of Microsoft in the 90's.In Steve Jobs's words, Apple priced for a monopoly that it no longer had vis--vis Windows 95 (Newsweek, 2004) and nearly paid the ultimate price of putting itself out of business.This year, whatever mistakes they make, THAT won't be one of them.

As to innovations:ahem.

The stolen "HD" iPhone at the heart of this article (plus other liberated info) shows a phone with 4X today's pixel count (much sharper picture), a 2.5X speedy CPU, probable better battery life - all tech innovations important to smartphone users and specifically, leapfrogging Androids.

The announced 4.0 software is already known to feature better multi-tasking than the Androids' (at the expense of requiring developers to be a bit smarter and use Apple's tools), a half dozen other major features plus whatever little surprises Apple can squeeze in by June 7th.

Many educated guesses (and my so-so ones) expect a deal with Verizon this year;today we even see the rumor that Apple might even figure out how to make voice+data work simultaneously on CDMA nets (VZ or S), a Neat Trick not previously seen.In other countries, Apple works with multiple carriers;I'd give even odds on 3 in the US by year-end.

I could cite many other dimensions to Apple's likely response to the Android competition:pricing;apps;music, vid and book access;cloud services;etc.Apple has made recent acquisitions or related announcements in each.

Some of Apple's innovations this year are just good engineering or product management that are trade secrets;some are clearly patentable in the US legal framework of 2010.All seem like business advantages that, if Apple keeps rights to, will allow them to continue the extremely rapid change they've created lately.(Not much "rotten fruit.") All are designed to re-establish the iPhone as Best Feature In Class, or to put a bit more distance between it and #2.Still, HTC, Motorola, Samsung et al have no small amount of talent, too, and if they can make phones that look to be comparable at a lower price, they will, and consumers will choose devices with real keys, bigger screens, little kitty logos, whatever. Reply

May 19, 2010 7:59 AM Walt French Walt French  says: in response to Michael Jones
Hence, Apple's lawsuits and police complaints to keep criminals from stealing the work that would allow consumers to say, "it works just about the same, but I like the feature."

There ARE innovators who are still around decades later (e.g., Ford) but most cannot manage the change of technology or fall victim to their own success.That may yet happen to Apple - it seems almost inevitable, eventually - but they just don't want it to be this year.

PS:I think you're confusing the "4G" label for the rumored iPhone with the 4G data network Sprint has rolled out, and others that will follow.See the AP story today about how nice THAT is, although very limited in coverage as yet.

May 19, 2010 11:10 AM Michael Jones Michael Jones  says:

Sadly, Apple has turned into nothing but rotting fruit.  Their copyright case against HTC (and indirectly Google and Microsoft) is another pissing contest initiated by Apple with it's only intention being to stir up public support and get free publicity.  This is exactly what happened to Microsoft when they were fearful of the Linux community by claiming that 200+ linux features were patent infringments.  Nothing came out of that either and instead of working on improving their product they put out a turn known as Vista.

Bottom line, Apple must innovate and create a product that can compete in todays market, not pretend that they can manipulate the market forever.  In the end, cell phone customers love their iPhones, but they don't love Apple.  Most of them are talking "droid" now, and not because of the phone but because of the network (AT&T).  4G is not something that Apple can own.  It's an open technology all networks will apply and there will be 4G iPhones, Driods, Palms (HP) etc... and there is nothing they can do about it.  You cannot control the ocean, but you can sail upon it.

Maybe Apple should spend it's legal $$$ finding a way to hold ATT accountable for the millions of dropped calls every day that are making folks look for an alternative to the iPhone.  I'm just sayin'

May 19, 2010 12:04 PM Tom McIntosh Tom McIntosh  says:

I agree with all the comments that describe the author of the article as some kind of nut.  My guess is she had a column to produce and what better way than to try and make the loss Apple's problem.  Apple is perfectly within their rights to protect their investments.  Only idiots claim the free advertising would offset the loss in sales. 

The idea that everyone is entitled to whatever they want is destroying initiative and creativity.  Why bother working when some will just take what they want and others will say that is fine.



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