Comment by anigbrowl | Hacker News Reader

Comment by anigbrowl | Hacker News Reader

tl;dr from the affidavit:

  [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)

Gray Powell last saw the phone when he put it in his bag on the floor, which was subsequently knocked over. He left with his uncle at closing time, unaware of his loss. A drunk guy gave the device to Hogan in the belief that it was his. Hogan took it home and realized it was worth money. Next day, he and a roommate found Gray Powell on LinkedIn and Hogan recognized him from the previous evening in the bar. Hogan removed the stickers with serial numbers.

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.

Very nice recap of the important points of the affidavit.

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?

Do these laws have any tests for determining if the owner of a "trade secret" is protecting the secret appropriately? I'm not looking for a defense of the clearly unethical and illegal behavior of Chen, Hogan, etc. I do worry that a person in a bar I'm drinking at may accidentally leave a trade secret lying around. I can't imagine Coke allowing an employee to take home the secret formula.

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'".

It is usually pretty easy for a trade secret owner to show that it is protecting its property by taking reasonable and prudent steps to assure that the information is kept confidential (e.g., by making everybody who deals with it sign NDAs, etc.). Accordingly, most proprietary developments of tech companies do fall within the protectable trade secret category unless the company explicitly makes the information public (e.g., by open sourcing it).

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.

YOU MAY DOWN VOTE ME but:

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'm sorry, but this logic is like saying that after you've paid for and beaten the hooker, well, you pretty much have to kill her, because otherwise she'll probably turn you in to the police...

what i'm trying to say is Gizmodo could have been humble and got more in return from Steve Jobs ...

I am certain that it gets Steve off when people do this for him. Humble themselves in his presence, grovel a little and hope that a scrap of fat from the Apple table will be flung their way. Because as we all know Steve should be in charge of the direction of their totaly independant company.

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.

Thank you.

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!)

Two things stand out to me from today's details.

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.

In light of this, Gizmodo would have most likely done much better overall if they would have beat a path right to Steve Job's door and returned the phone when he personally called and asked them to.

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.

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.

Yes, very stupid on Gizmodo's part. They are lousy business journalists if they don't know who has a bigger legal war chest.

The should expect Apple doing that and should treat the matter with utmost care. Theydhould never refuse to return the phone promptly, nor damage it. They could film it, photograph it and then return it.

I like, personally, to go by the "what goes around comes around" rule and would probably return the lost prototype, because if I ever misplace a prototype, I would like it back.

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.

He did not say, or even imply "not until." He said it doesn't make sense to give Apple the phone until Apple says that it is officially theirs. But, they didn't refuse to return the phone, conditionally or unconditionally.

It seems to me (IANAL) that Gizmodo took on a lot of legal liability in that email. They basically admitted they knew:

* 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?

Every time I imagine him talking to his legal counsel, I see Brian Lam and Dr. Gonzo cruising down a desert road in a red 1971 Chevrolet Impala. “No point in mentioning Steve Jobs. Poor bastard will see him soon enough.”

I don't believe they had that much fun, but the quality of the legal advice seems comparable.

What the hell were they thinking putting all of that in writing?

It was clearly not "The e in email stands for Evidence."

They are press (for some values of "press", at least). They should not take item 3 in consideration. Having your secrets leaked is a risk Apple has factored in their processes.

"I understand the position you're in, BUT".

"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.

Do we get an apology from all the Gizmodo apologists who ran around with pitchforks and torches against Apple?

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.

How did they find the evidence in these random places? I suppose that Hogan told the police where they were... I can't imagine the police went all CSI and traced it to bushes and churches (!?).

It was mentioned in the affidavit. Warner was the one who went around hiding the evidence. When confronted, he divulged the secret locations. Both Hogan & Warner seem like ultra sketchy people. It's funny that Hogan made the remark "Sucks for him. He lost his phone. Shouldn’t have lost his phone.” when referring to Gary Powell who might lose his job over losing the phone. Hogan & Warner will probably have a felony record stamped on their foreheads for life.

The more I hear about this story the more I believe the phone was stolen and never lost.

What a coincidence that a bunch of characters like this would 'find' a phone.

I think we have all had situations where we would have forgotten something if not for someone calling us back as we left or holding onto it and giving it back next time.

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.

Sure, that happens all the time. But the usual is then indeed to follow the path back and alert the owner, not to sell off their property.

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.

What a brilliant way to discard evidence.

They're not natural born killers, that's for sure. If they killed someone, they'd hide the weapon in a church and just throw the body behind a bush. I've always wondered why most criminals are so stupid sometimes...

Generally it goes hand-in-hand with being dumb enough to commit a crime in the first place.

The EFF still feels the warrant was definitely improper, now that they've seen the whole thing (http://www.eff.org/deeplinks/2010/05/iphone-warrant-affidavi...) citing section 1524(g) of the CA penal code, which says no warrants can be issued for [unpublished information obtained/prepared by a journalist].

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.

I have been a longtime supporter of the EFF but I think they should stay out of this. The knee-jerk response related to journalistic privilege seems incorrect and as time goes on it is becoming very clear crimes were committed.

Agreed, and I emailed the attorney who wrote that piece and told him as much. That affidavit reads like a Coen Brothers screenplay, and I don't see any room for EFF to defend anyone involved in the whole sordid affair. (Except maybe the roommate who tried to talk Hogan out of selling the phone.)

Is receiving a good for your own personal use or resale the same thing as receiving it for the purpose of reporting on it then returning it right after? Intent here seems to be overlooked by quite a bit of the commentary.

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.

Is receiving a good for your own personal use or resale the same thing as receiving it for the purpose of reporting on it then returning it right after? Intent here seems to be overlooked by quite a bit of the commentary.

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.

Well, reporting isn't a selfless act, most of the time - the goal is to match eyeballs to advertisements. You're right that they would have been a lot better off to get rid of the thing before they published a word, rather than waiting for Jobs to call. Perhaps they were nervous about the fact that they damaged it during the teardown.

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