Gizmodo editor Brian Lam's email to Steve Jobs
networkworld.com
networkworld.com
[Suspected CA penal code violations by Chen]
496(a) - Buy or receive stolen property (felony)
499c(b)(3) - Without authority make [photographic copy of] a trade secret (felony)
594(b)(1) Maliciously damages property of another valued over $400 (felony)
Gizmodo, via Chen, paid Hogan $8500 or $7500, including $5000 in cash, and promised a bonus if Apple launched a phone by July and it was the same device. Chen damaged the phone during his teardown, rendering it inoperable. Gizmodo published their story on 4/19. Hogan's roommate called Apple the same day and informed them of Hogan's possession and plans to sell it. Gizmodo editor Brian Lam refused a telephone request from Steve jobs to return the device, demanding a written confirmation from Apple.
When police attempted to contact Hogan and his other roommate (not the informant), they tried to destroy evidence by throwing away Hogan's computer and SD cards, all of which were later found, along with the phone stickers. Hogan's roommate was arrested on unrelated outstanding warrants.
...
On the facts in the affidavit, it looks bad for Gizmodo/Gawker. Admittedly, I've said that since the outset. Much depends on who authorized payment and how, and what Chen was told by his supervisor(s) about his legal position, if anything.
Edit: corrected an inaccuracy about when the roommate called Apple, which I had put in the wrong paragraph.
edit: To all the people who screamed that Apple was just being an evil corporation when they executed a search warrant:
Hogan's roommate cooperated fully with authorities and assisted them when Hogan and an acquaintance removed several pieces of evidence from his apartment. The evidence, which included a desktop computer, USB flash drive and memory card, and stickers from the iPhone prototype, were found in a church, under a bush, and in a gas station parking lot.
What a coincidence that a bunch of characters like this would 'find' a phone.
It's hard to believe that these guys thought it a good idea to make a couple of thousand dealing with something a company has literally billions invested in the product line.
The way they went about it is stupid, the way it is playing out right now could very well put one of the IT trash sites out of business, and Apple will have made a point.
Alls well that ends well.
First, upon being contacted by Steve Jobs directly to recover the stolen prototype, Gizmodo's answer wasn't "yes", but instead "not until...". However bad you think that is by itself, amplify it by the fact that of 28 sentences in Brian Lam's mail to Steve Jobs, no fewer then 17 of them directly reference the business benefits to Gawker Media of unlawfully retaining the phone, and at least 3 of them make direct reference to the possible harm to Apple that could occur should the details of the phone be disclosed.
Second, Apple legal, presumably as an affiant during the process of securing these warrants, stated directly that it's measuring damages in terms of how much the disclosure hurts the current sales pipeline of iPhone 3GS devices. I hadn't considered that, but it makes perfect sense, and it's a pretty scary thought. A very tiny percentage of current iPhone sales can safely be presumed to completely swamp all of Gawker's top-line revenue.
Also "news" to me, but less important, because Brian Hogan is clearly a douchebag who is going to lose more from this event than he could possibly ever have sold the phone for:
Hogan knew who the rightful owner of the phone was before he talked to Gizmodo. There's no pretense here of helping to effect the return of the phone. He straight-up stole it.
Why?
First, Jobs himself would appreciate the ethics and honesty that could have been prevalent throughout this "transaction." Second, you can bet that what comes around, goes around, and Gizmodo would have most likely been rewarded in July when new products are released.
Instead, Gizmodo took the low road, and directly snubbed Jobs in the process. I bet Jobs told his legal team to do whatever it takes and whatever it costs to bring Gizmodo down. If someone had a lost prototype of one of my products and decided to extort/ransom me, and I had 40 billion dollars of cash reserves, I would release the hounds.
This does not look good at all for Gizmodo.
Yes, very stupid on Gizmodo's part. They are lousy business journalists if they don't know who has a bigger legal war chest.
I don't, however, like when the press offers some favor to a company in return for future favors. The press has certain obligations that are frequently at odds with simple courtesy.
Imagine, for a moment, not a phone, but documents proving "Apple Energy" bribed government officials in order to build an unsafe nuclear power plant and Gizmodo offering to return then in exchange for monetary gain.
There was a line crossed somewhere between these points.
Also, this whole idea the press should be friends with the subjects of their reporting is pretty much everthing that can be wrong with the press.
* the property was in their possession inappropriately
* it was a trade secret
* it would significantly damage Apple by publishing the story
It's also clear that the letter is used to substantiate the story for Gawker's benefit, not because there was any doubt about the legitimacy of the phone.
What the hell were they thinking putting all of that in writing?
It was clearly not "The e in email stands for Evidence."
"Something like that [...] WOULD MAKE UP FOR GIVING THE PHONE BACK RIGHT AWAY".
"I want to get the phone back to you ASAP [...] BUT".
This was not Apple asking Gizmodo for a favor. Gizmodo had a legal obligation to promptly return the phone.
A couple other items of note:
The detective's summary relates the facts concisely in terms of the crimes believed to have been committed, as follows:
"Suspect Brian Hogan found or stole a prototype iPhone 4G that was accidentally left at a restaurant by Apple employee Robert 'Gray' Powell. Hogan identified the owner of the phone as Apple Engineer Gray Powell through the contents of the phone and through Internet searches. Rather than return the prototype phone to Powell and/or Apple, Hogan subsequently sold the iPhone [to] Jason Chen in Fremont for $5000. Upon receiving the stolen property, Chen disassembled the iPhone, thereby causing it to be damaged. Chen created copies of the iPhone prototype in the form of digital images and video, which were subsequently published on the Internet based magazine Gizmodo.com."
California Penal Code 499c(b)provides: "Every person is guilty of theft who, with intent to deprive or withhold the control of a trade secret from its owner, or with an intent to appropriate a trade secret to his or her own use or to the use of another, does any of the following . . . (3) Having unlawfully obtained access to the article, without authority makes or causes to be made a copy of any article representing a trade secret." ["Copy" is defined in 499c(a)(7) to mean "any facsimile, replica, photograph or other reproduction of an article, and any note, drawing or sketch made of or from an article."] Violation of 499c(b)(3) is a felony.
The real damage here consists of revealing Apple's trade secrets to the world, and it was apparently done deliberately for direct financial gain (even if that gain did take the form of hits to the Gizmodo site).
The investigation is being led by the San Mateo County REACT unit, which often works in cooperative investigations between the local D.A.'s office and the U.S. Attorney's office. So far, we have not seen any involvement publicly of the U.S. Attorney's office in this case. That does not mean, though, that they are not involved. If the economic harm stemming from trade secret thefts is significant (as it appears to be here), the Economic Espionage Act of 1996 might also be used as a basis for prosecution under federal law. It provides in relevant part as follows: "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."
A final note on how these sorts of matters tend to unravel for the malefactors. The recitals of probable cause that one or more crimes have been committed, as set forth in the affidavit, concern Jason Chen individually and not his employer (meaning that he personally will be charged in any indictment that is filed). Mr. Chen has retained his own separate criminal defense lawyer to defend himself (http://www.law.com/jsp/article.jsp?id=1202453303236). Prosecutors have broad discretion in such cases on how to fashion the charges brought and also concerning any plea deals struck. If the goal here is ultimately to get to Gizmodo/Gawker, who do you think will be the first to incriminate them?
Thanks for your analysis of the pertinent points of this case. Just one more thing I have to keep on my mental list of "things that can get you 5 to 10 in the 'Land of the Free'".
I don't think there is any particular need to worry about stumbling upon trade secret information and incurring the risk of criminal prosecution. Anyone in such a position who has honest intentions can have a pretty good sense of what to do (report it, turn it in, etc.) and, if unsure, at least of what not to do (sell it for $$$, rip off serial numbers, photograph details and publish them on the web).
Remember, each of the criminal statutes requires that someone act in relation to trade secrets "with intent to" do something wrong (convert them to his own use, harm the owner, etc.), and prosecutors must prove this "intent" element (what the lawyers call mens rea or "evil intent") beyond a reasonable doubt. Most of us will be quite safe, then, even if we do happen to stumble upon lost property at a bar.
First thing first: Gizmodo should have taken high road, and that email was certainly a mistake ...
But it is also important to note that Steve Jobs called Gizmodo after the whole story was published (I guess so) this puts Gizmodo in very risky position if they don't give an CONVINCING explanation to their readers regarding whereabouts of iphone ... nobody will believe if they said that Steve Jobs called them and they returned the phone ...
If I were Gizmodo, I wud have called Jobs before publishing anything and got myself in his good books and I guess Jobs would have certainly returned my favor in one or other way ... alternatively If he (Jobs) called me after details were published, even then I wud have returned the phone by being as humble as possible at the same time making sure that I dont loose face in front of my readers (again I guess Steve Jobs wouldn't have ignored my favor)...
I am not educated enough on the details of this situation to comment on the actions of the parties, but good for him for standing up to Steve in that email and telling him, you have never scratched my back, you have kicked me a few times and now it is your turn. I am sure that really chapped Steve's bum.
As to your question of who would be the first to incriminate Gawker, rather than Chen: Probably the Computer Hacking & Intellectual Property (CHIP) unit in the criminal division of the US Attorney's office for the Northern District of California, located in San Jose. Gawker's legal representative would have to be summoned and indicted by a grand jury, unless the firm chooses to waive that right and proceed to a hearing.
Gawker Media LLC is a Delaware company headquartered in New York. Title 18 §3237 provides that any offence begun in one district and completed in another (eg CA and NY) can be prosecuted in either district, but it would probably be most practical to do so in California.
Gaby Darbyshire is COO and legal representative of Gawker Media, and per a letter [1] taken into evidence during the search was fully apprised of the situation. The letter did not repudiate or disavow Chen's actions but rather emphasized his employment by Gawker and use of his home as his regular place of employment. Under the doctrine of Respondeat Superior, Gawker is liable for acts carried out by Chen because an agency relationship exists between them; and because he committed a crime, in the scope of his employment, with the purpose of benefiting his employer. Even under the stricter rules of MPC 2.07, Gawker's COO and CEO appear to have approved and even reveled in Chen's illegal actions, and thus acted with scienter.
1. http://gizmodo.com/5524843/police-seize-jason-chens-computer... 'Gawker's legal response to police'.
small voice I think... (edit: FYI grellas is a real attorney, whereas I'm just thinking about trying to become one...don't rely on anything I post!)
I am not so sure about this legal theory. Courts have upheld judgments against CA journalists for engaging in actual criminal activity. Also, attorney privilege, which considerably exceeds that of reporters, falls in a case where there is probable to cause to believe an attorney obtained information by committing a crime (CPC 1524(h)). So, debatable.
That said, is there a public good for having obvious trade secrets reported on to the public? I am not sure a good case can be made there. However, there are like 3 secret IPhones running around. Clearly, if it's a trade secret Apple is not working as hard as usual on keeping it for some reason. How many times have we seen leaks like this from Apple? Not very frequently.
I don't see that the specific crime is important here; what's important is that goods which were technically stolen under California law were received by Gizmodo for the purpose of committing another crime under California law (revealing trade secrets).
And no, calling a tech-support line in Uttar Pradesh and asking if they've recently misplaced an engineering prototype would not be considered a legitimate attempt to return the phone.
As a longstanding EFF member, I just wrote to Matt Zimmerman to ask what this case could possibly have to do with journalistic privilege.
While in the residence, I observed Hogan utilize a black LG cellular telephone (bearing SN 911 KPFX363699) to make and receive telephone calls. Based upon my training and experience, I know that persons who buy and sell stolen property often use cellular devices to negotiate via telephone calls, email, and/or text message. I also know that the continued use of the phone would likely overwrite and destroy evidence that currently exists on the phone. Based upon the above facts and the fact that the cellular device was in plain view, I seized the phone as evidence and to prevent any further destruction of the digital evidence.
But then Warner seems pretty sketchy:
A records check through County Communications revealed two (2) outstanding misdemeanor warrants for Suspect Warner. Warner was subsequently arrested and handcuffed by Deputy Jim Goulart of the Sheriff's Office for the outstanding warrants only. While seated in the back of a patrol car, Warner made a spontaneous statement to Det. Josh McFall that he knew where the missing flash drive was located. Det. McFall read a Miranda Advisement to Warner and Warner waived his rights. Warner subsequently directed us to a bush located on the north side of Harding Ave at the intersection of Lancaster Way, Redwood City. In the bush, I located a 512 MB Memorex thumb drive and a 1GB Lexar Media compact flash card. The Lexar 1GB flash card appeared to be of the same type that would be utilized by the previously mentioned and seized Canon SLR camera.
At approximately 0230 hours, I went to the Chevron Gas Station located at 585 Whipple Avenue in Redwood City. I conducted a search of the premises and located the missing Apple prototype sticker in the parking lot near the entrance
And this line was another odd one.
I therefore pray that a search warrant be issued.
I wonder what was in the flash drives? Pictures of the iPhone? Seems like it would be easier to just format the drive instead of physically disposing it somewhere...
In what sense did Mr. Hogan "find" the phone?
I have previously suggested that removing a chattel that doesn't belong to you from property that doesn't belong to you is theft. Hearing these allegations doesn't change my view in any way. In the hypothetical case that someone hands you something that doesn't belong to you or to them, the correct thing to do on the spot is to refuse. Accepting something that doesn't belong to you is already wrong. The simplest and easiest thing to do is to simply say, "Not mine, but thanks."
I feel for Mr. Hogan and Mr. Lam. Of course, none of these allegations have been proven in court, so I have no idea what they actually did or did not do.
But my short time on this ball of rock and water has taught me that when people support you only to discover that you were a blackguard all along, their goodwill becomes countered by an equal and opposite reaction of contempt.
The people who shrugged their shoulders initially are probably still shrugging. But I predict that many of those who stood up and defended Mr. Hogan's and Mr. Lam's actions will swing to become their most vocal critics if these allegations are borne out. Nobody wants to feel like their good nature and trust has been abused, even if indirectly.
I imagine not going volcanic on that call was the hardest thing Steve Jobs has ever done.
- Apple makes beautiful computers
- ... that run a descendant of NeXTSTEP
- ... with development tools that are direct descendants of the NeXT tools (down to the use of Objective-C)
Apple is a well funded NeXT. Jobs turned the post-Jobs Apple into NeXT 2.0
And that's a high compliment both to him and to Apple. Nobody would like to be 90's Apple.
Love the fact that Brian had the stones to not take Steve's call that day.
The phrase failure of imagination has been used to describe the cause of the Apollo 1 fire in 1967. The term was attributed to astronaut Frank Borman, speaking at the Apollo 1 investigation hearings (dramatized in the HBO mini-series From the Earth to the Moon in 1998.) — wikipedia
It surprises me because I can't imagine Gizmodo having any right to withhold the phone from its rightful owner (Apple). Like "Oh we have your missing property, and we'd love to give it back, but you have to do something for us first". I don't know the legal system, but that just can't be right.
It's an apple-branded phone ffs. The Gawker editor clearly dug a hole for himself with that email, and Jobs was right to send in the dogs (as much as I hate to admit it)
What's missing is how much of this unfolding debacle (including the letter) was approved directly by Nick Denton?
Extortion and coercion are clearly not their strength, though they seemed to think it was :)
There's a great line in The Usual Suspects: "How do you shoot the devil in the back? What if you miss?" Lam must have thought that was a rhetorical question when he wrote that email. I'm sure he thinks different now.
I wonder whether the investigation continues, or whether Apple have requested the DA's office not to file charges and the DA has agreed. As prosecutors objected to the unsealing of the warrant, I guess the former.
They should look it up in the dictionary. It's right next to money-laundering :)
Furthermore, 'do as we say and you can have your property back' IS coercion. They were forcing Apple to behave in a way that they didn't want to.
Edit: Wow, you just edited that comment too. If you are going to edit your comments so heavily could you please leave what you originally said at the top of the message.
FWIW, it is normal for me to go through a couple drafts of my comments on any topic. If you look at my posts on Reddit you will see they almost all have a "*" that shows they were edited, for the same reason. I don't know why some people are so quick to try to find malicious intent in everything.
In these sorts of threads, it is polite to readers to post
After edit:
if a comment is substantially edited. I give examples of this in my threads. The possibility of posts being edited is one reason why I always select-copy-and-paste to quote text from other people's comments here, to avoid introducing misquotations through my own typing mistakes.
I am not a lawyer, but I am curious about the legal ramifications of the case for many reasons. I am trying as best I can to interpret the email literally and objectively, because I think that's the only way that it will be interpreted in court in any future court cases on this matter.
I think one aspect of this case is particularly interesting: I have the impression that the phone was much more likely to be returned by Gizmodo than by the "finder." And, I think Gizmodo paid for access to the phone, knowing that they would have to return it to Apple if it was Apple's. The thing I'm really curious about is whether the court thinks they really "bought" the phone, or whether they paid for temporary access to the phone and agreed to return it to Apple if it was theirs, or whether there's no difference legally. In other words, it seems likely that Gizmodo's payment for the phone enabled and/or accelerated its return to Apple. (Compare it to the case of the other lost iPhone prototype in Vietnam this week, which Apple will almost definitely never get back.)
If this ever goes to trial the lawyers will demand a change of venue out of the bay area, they'll never get a fair shake with the serious infestation of Apple fanboys around here.
I'm not a lawyer either, but I feel pretty sure than any objective reading of it will be interpreted by a court as withholding of stolen property, which is yet another felony offense in what seems to have been a long string surrounding this device. I wonder if Lam has hired an attorney yet, as Chen did.
IMO indisputability is a HUGE deal.
Hey Steve, this email chain is off the record on my side.
I'm surprised he had the audacity to write some of this stuff..
"I get that it would hurt sales to say this is the next iphone. I have no interest in hurting sales. That does nothing to help Gizmodo or me."
wait for it... wait for it...
Gizmodo: "WE FOUND THE NEXT IPHONE!"
In fact one could say it is perilously close to blackmail.
Apple tries to maximize their profits by duping their customers. In the affidavit the Apple lawyer complains to the detective about all the sales they're going to lose when people find out about the new phone and don't buy the old model. But those lost sales are ill-gotten gains. That money comes out of the pockets of ill-informed customers that would not make the purchase if they had all the facts available to them.
It is exactly this kind of market manipulation that a free press helps protect us from. When a journalist writes a bad review or tells you that there are better deals elsewhere, he is "hurting overall sales and negatively effecting earnings" of that company, but it is benefiting consumers and society as a whole, and creating better more efficient markets.
Legally there might be some dispute, mainly because of the BS "trade secret" laws written by businesses for businesses, but morally I side 100% with Gizmodo's right to uncover and report the truth.
On a side note, the idea that cops can go around "seizing" cell phones and cameras without even having warrant is disgusting. And he doesn't even want the property returned, at the end of the affidavit he invokes some surely insane law to have the property "disposed of".
Wow. Three seconds of research would have told you that this "insane law" does discuss the disposal of Chen's property... back to Chen. He's asking that as a courtesy to Chen, to make sure he gets his stuff back as soon as possible.
http://www.leginfo.ca.gov/cgi-bin/displaycode?section=pen...
Apple are not preying on uninformed customers, they are selling a product to a consumer who wants that product as-is, if they didn't want the product they would not buy it.
If they had all the information available to them they would not buy it. Those are the loss sales that Apple is worried about.