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Comment by neonfunk | Hacker News Reader

In terms of appearances, the DA pursuing criminal charges is the best possible outcome for Apple. They get the satisfaction of seeing Giz and/or the "thief" scrutinized for their actions without risking the fallout of aggressively pursuing them with a civil suit.

Substantively, I admit not understanding the legal intricacies.

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This does not look good for Gizmodo, and I can say this even as someone who does not practice criminal law.

Why?

1. The REACT unit is a dedicated unit established to fight tech-related crimes, and I would not take it lightly to know that they were investigating my conduct.

2. California's stolen property laws would appear to apply here and may well have been violated.

3. The much more serious federal Espionage Act of 1996 appears on its face potentially to apply as well - "Whoever, with intent to convert a trade secret, that is related to or included in a product that is produced for . . . interstate . . . commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly . . . steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information . . . shall . . . be fined under this title [i.e., up to $5 million] or imprisoned not more than 10 years, or both."

4. The "intent" element, normally hard to prove for criminal purposes, is strongly bolstered by facts admitted by Gizmodo (payment for the item, intent to get hands on Apple trade secrets, holding the property for an extended period) and is countered only by what appears to be the merest pretext of an excuse (supposed doubt about the genuineness of the item).

Maybe the first amendment will shield Gizmodo, or maybe the D.A., after investigation, will drop the matter, or maybe it is a stunt and Apple ultimately will not press charges, but if I were Gizmodo I would be concerned where this might lead.

I just don't think trade secrets are relevant in this case. It stops being a trade secret when you leave it in a bar. If the Apple employee was not authorized to bring it to a bar, that could be a problem for him. But since Gizmodo made no effort to induce anyone to expose Apple's trade secrets, it's very unlikely that they will be held accountable for doing so. They bought a stolen phone that happened to be a good news story.

It's just an unfortunate set of events, not a crime.

Now, the "stolen goods", OTOH, could get them in trouble, but that applies to any phone ever left in a bar. I bet if I lost my phone in the bar, no computer crimes unit would be investigating. I'd probably just be laughed at.

Apple's phone should be no more special, under the law, than mine.

The difficulty there, however, will be proving that the phone is worth $400. If I pay you $10,000 for your toenail clippings, that doesn't make them worth $10,000. That makes me an idiot.

My estimate is that no charges will come of this. I also assume the guy at Apple won't be on the "testing our super-secret prototypes" team anymore.

OK, but UTSC addresses the idea that a trade secret could be acquired 'by accident or mistake'. When the guy found it and popped the cover, he guessed what it was but the general public did not know. So he got that info thanks to the employee's mistake. If he had locked it away or returned it, none of us would know.

Gizmodo might be idiotic for paying $5000, but more likely they thought it was a prototype, which would be newsworthy. And nothing forced them to post 20 pictures of the internals after deciding it was real. Up to that point, the internals were secret and not even the finder knew what they looked like.

I'm willing to wager $10 on it if you like :)

They KNEW it was not a prototype.

Again, the only source of the "left in a bar" story is Gizmodo. That may be the story the seller told them, but it hasn't been confirmed by anyone else.

If the seller "acquired" it by more overt means, they have plenty of reason to lie about it. Particularly if they "acquired" it after noticing it wasn't an ordinary iPhone, at which point things really do start to drift into trade-secret territory.

Two facts corroborate Gizmodo's story. One is that the iPhone was disguised to be an older model. If it were just a model designed to sit on a test bench, I doubt it would be camouflaged. If it were intended to be tested in bars, however, then that makes sense.

Secondly, the identity of the Apple employee was released. He has a great incentive to say, "someone came into my lab and threatened to stab me if I didn't hand over the prototype". But, he has not denied the lost-in-a-bar story, even though he has an incentive to do so.

So I think the "story" is probably right.

I don't think Powell's public silence to date indicates anything other than the fact that Apple hasn't authorized him to discuss it in public. (Most large companies wouldn't under the circumstances, it's not an Apple thing.)

If the phone was in fact stolen from him, he has no reason to comment in public right now--his job is safe and his name'll be cleared by the investigation.

IIRC it was confirmed that the engineer was at a bar because he had updated Facebook (via the phone) mentioning the delicious German beer he was drinking (hence the German airline offering him tickets to Germany).

...because once you're at a bar, it's only possible to loose things, not to have them stolen?

Hmm, I may have replied to the wrong comment, or misread it. I only meant to say that the device wasn't stolen from Apple campus, not that it couldn't have been stolen at the bar.

The difficulty there, however, will be proving that the phone is worth $400.

In the US, a completely unsubsidized current-generation (3GS) iPhone carries a sticker price of at least $499. It's unlikely that an as-yet-unreleased next-gen model would be worth over $99 less than that.

It has an established market value of $5,000. The fact that it was unreleased and secret increases its value quite substantially.

The difficulty there, however, will be proving that the phone is worth $400.

This phone isn't in production yet. You can put a much higher value on a "prototype", including all the R&D, tooling expense, new materials, etc etc etc.

And what if the 4G retails for $1,999? How about $499,999? You can't prove it won't at this point, can you? Saying the older model is the example for the cost of the new one isn't a logical connection in a court of law.

You can open it up and start adding up the costs of the electronic components inside.

Sure, and Apple can say "that 4G had a new processor chip. We've only built 10 to date and spent 40 million dollars on designing it, doing revisions, and renting fab time to make these 10."

Now the phone is worth 4 million dollars.

The law above pretty clearly covers the "Oops, I found it in a bar!" scenario:

...steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information...

Appropriates? Takes? Carries away? Yes.

But trade secret? No.

And that's the foundation of the law -- "A trade secret, as defined under 18 U.S.C. § 1839(3) (A), (B) (1996), has three parts: (1) information; (2) reasonable measures taken to protect the information; and (3) which derives independent economic value from not being publicly known."

In this case, reasonable measures were not taken to protect the information. That makes it a cool new gadget that Steve Jobs wants to surprise everyone with, not a trade secret. And that category has no special legal protection.

It was effectively stolen from a bar. For all we know it was totally stolen, not "lost and not returned and stolen by default." It was wrapped in a very special case in order to disguise that it was a new model.

Gizmodo opened it up and shared its guts, which were of course, totally secret up to that point.

Your definition of "reasonable measures" and the court's are going to be two very separate things.

The taking it to the bar at all was likely a reveal of the secret.

Two things...one is that one can't just shop around for the most favorable jurisdiction. The other is that although you insist taking the thing to a bar was not a reasonable effort at secrecy, you also argue that it was quite effectively camoflagued for that specific purpose.

Sounds like a reasonable measure to preserve secrecy to me.

There was a longish discussion about this yesterday at http://news.ycombinator.com/item?id=1284949 if you're interested. I'm not a lawyer but I think what Gizmodo did violates the Uniform Trade Secrets Act (which California has adopted). I think it violates the economic espionage act too, but grellas has already discussed that.

Edit: bizarrely, Gizmodo mailed me earlier (after the CNet report had appeared) to clue me in on how Apple disguises their prototypes. It seems not to have occurred to them that this, if anything, emphasizes the idea of the phone being a trade secret.

I wonder if they think only the guy who sold them the phone is at risk of prosecution, and that the California Shield Law (which offers reporters a defense against contempt of court charges for refusing to reveal a source) gives them all the legal cover they need. Seeing as how their COO and legal adviser is not a US lawyer (http://gabydarby.blogspot.com/), they may be in for a surprise.

How Apple Conceals Prototype iPhones

There's a reason why more people haven't seen the next iPhones before Steve Jobs makes an announcement: They're in disguise.

This iPhone, which looks drastically different from the 3GS, was enclosed in a custom-molded plastic case so it could be used in public without attracting attention. In regular use, you would think that this was just a standard iPhone with the writing scratched off the back. Very clever.

The plastic case, which comes apart easily, looks just like a 3GS. When you pry the case apart, three bits—the power button, the mute switch and the volume rocker—quickly shed off. It's weird that these bits are made of plastic, when the corresponding parts on the 3GS are made of aluminum/metal.

To reassemble the case, all you have to do is make sure the little plastic bits are in the right place before popping the front back on. A very ingenious solution to protect future designs from lookeyloos. One of the best bits is that the case looks like a case FOR an older iPhone. iPhone cases are seen so often, that even if this one looks weird and doesn't match up to the 3GS body, it can be easily dismissed as just being a lousy case.

PS mailed me as a Gizmodo subscriber, not personally.

Seeing as how their COO and legal adviser is not a US lawyer (http://gabydarby.blogspot.com/), they may be in for a surprise.

Usually people with a "C" in their title don't actually do the work for the departments they manage. The CTO of my company is not a Haskell programmer, but we have working Haskell production applications.

I don't think the legal intricacies are that complicated, though lawyers will undoubtedly make them so before this hits the courts.

The phone was not the finder's to sell. AFAIK, finders keepers is not a legal defence. Gizmodo must have known they were buying hot property - they didn't buy it from the owner and they paid far more than the going rate for smart phones.

Draw your own conclusions.

I doubt Gizmodo would go quietly, though, and there could be some reflected scrutiny thrown back at Apple. There's those tickets that were claimed to have been opened in an attempt to return the phone, for example...

That might be a defense for the finder, but for Gizmodo? I guess you could suggest it showed Apple had abandoned it, but equally Apple might say call center staff would not know of such things (because they were secret).

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