Turns out Safari Reader is based on Open Source project Readability
downloadsquad.com
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WebKit is based on KHTML though from KDE, so not entirely Apple's. Not to mention that chrome uses V8 which is not JScore from Apple but full Google's code.
(Yes, clearly Google has contributed a lot of open source code too).
They built the project on KHTML so they wouldn't have to start from scratch. And because KHTML is under the LGPL, WebKit will have to remain open source unless they removed all KHTML-related code, which I'm sure is not worth the investment.
http://dot.kde.org/2005/06/07/apple-opens-webkit-cvs-and-bug...
This isn't to suggest Apple is benevolent. There are plenty of good strategic and practical reasons for this decision.
Drama averted.
There's probably nothing legally wrong with what Apple did
Since when is using open source code while properly attributing the authors "probably legal"? Last time I checked, it was most certainly legal and encouraged even.