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What if Apple pulls Instapaper from the iPad/iPhone app store claiming it duplicates capabilities?

Unlikely. There are lots of non-Mac iPhone/iPod users who won't use Safari even if available on their platform.

I don't believe they've ever pulled an app that had already been up on the store for duplicating built-in functionality.

There was the kerfuffle at the start of the month with QuickPick. Apple rejected an _update_ to an app that was already on the Store that duplicated (future) built-in functionality: http://www.tuaw.com/2011/04/08/quickpick-update-in-limbo-for...

The original version of the app is still up on the Store, but the update was rejected. Which is confusing.

They did during the Google Voice fiasco. A bunch of third party GV apps that were already approved (GV Mobile was one [1]) were pulled. Since rectified, but has happened before.

1: http://www.seankovacs.com/index.php/2009/07/gv-mobile-is-get...

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