How Apple Screwed Up With the iPhone 4G

By  |  Tuesday, April 20, 2010 at 1:37 pm

No doubt, Gizmodo has turned the tech news cycle on its head this week with its exclusive on the iPhone 4G. Everybody from MSNBC to Good Morning America, and even the ladies on The View are talking about what is arguably the biggest leak in consumer technology history.

What has ensued beyond just the basic story of 27-year-old Apple developer Gray Powell’s now infamous drunken night now has turned to Gizmodo’s culpability in the morass. Some bloggers have gone as far as to publicly call for Apple to sue the publication, but doesn’t Cupertino share some of the blame for this mess?

In the simplest terms, yes. As a journalist who has covered Apple for much of the last half-decade, I have to say I am absolutely shocked that this would have even happened. For a company that prides itself on its secrecy — writing on Apple can be much like walking blindfolded into a maze — this is a stunning lapse in judgement.

First off, it is beyond comprehension to me that the company would allow an lower-level employee to walk off One Infinite Loop with a prototype in hand on a personal jaunt. I could understand if he or she was on the clock and out for lunch, but this was purely on Mr. Powell’s personal time. As somebody who has lost their phone/wallet/keys one too many times after a night out imbibing with the friends, I know unfortunately how easy it is.

As Ian Bettenridge points out, this almost singlehandedly kills any trade secret case that Apple may try to press. According to US law (see U.S.C 1839 3(a)), in order for it to be prosecutable under trade secret law, “the owner thereof has taken reasonable measures to keep such information secret.”

Taking it to a bar using it in a public place where it can be seen no longer keeps it secret. The case used to hide the thing looks so rough from the pictures that it is almost obvious that there’s something up with it. All around a poor job by Apple to keep it under wraps.

Second, failing to report the device as stolen with the proper authorities was another mistake. If the company wants to press a case on stolen property, you can’t without a police report. To my knowledge and research, no such report exists. I’d venture to guess that if it was discussed, it was not done because news of the police report would have certainly made it to the press.

(With all due respect to Daring Fireball’s John Gruber who’s been on top of this story like a hawk covering all sides, even if your sources say they considered it stolen, they sure weren’t acting like it.)

I’d argue the primary culpability, if any, sides with the finder from all that I have read in the case law. The courts have been very reluctant to prosecute the press over confidential leaks in all but the most egregious cases, and this by far seems to not meet that level. There is just too much to prove on Apple’s part to make any case against Gizmodo worth it.

Apple can take a lot away from this incident — including reviewing its policies on taking prototype equipment off of Apple premises (shocked there apparently is one outside of their highest executives!). But the worst thing it could do is turn around and make this a bigger issue with lawsuits, which are sure to only make the company look bad.

This isn’t the ThinkSecret case. This time, the whole world is watching.


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18 Comments For This Post

  1. Bill Pytlovany Says:

    Apple keeping thing secret is a serious matter and folks who tell stories don’t need to exaggerate.

    When we partnered with Apple and I worked on AppleLink Personal Edition Apple actually send inspectors to confirm that all development machines were under an additional locked lab that was only accessible to employees who knew about the project. I don’t remember all the other security steps we had to take but even for DC area company they were pretty strict.
    I recall one time when Jean-Louis Gassée was annoyed that we made him show ID before allowing him in a private room at AppleFest SF.


  2. Marcelo Vaz Says:

    Does anyone really buy this lost iPhone story? How appropriate is that when Android phones are getting momentum and Apple is not ready to release its new iPhone yet? I wouldn’t be impressed if, on the new iPhone release date, people find out that a lot of features (like 80Gb storage) found on this “lost” model are not available, and that they were just tests (or a buzz creator).

  3. Andre Da Costa Says:

    What Apple should do is ban both Gizmodo and Engadget from future Apple events as punishment. Journalistic integrity would suggest that they return the device to Apple. But, of course, there is a scoop involved, a huge one at that. Its intellectual property and one that others in the industry are trying to top. Suppose this had leaked last year? Apple would be in a terrible position since it could affect sales of existing iPhone 3GS and also give competitors a clue into what Apple is up to. Now they know, lucky thing is, Apple is at least a few months away from releasing the final product.

    The employee should be punished, but not fired, remove him from that position and require that he and no one use Apple products during a certain time of the day unless directed. He was using it after hours so there was no need to be testing the device then.

  4. Peter Says:

    I am glad that Apple has employees testing prototype phones outside of 1 Infinite Loop. I’m sure AT&T’s service works great there, but out here in the real-world where iPhone service is crap, it’s good to see someone doing some testing and maybe figuring out why there’s an issue before I buy the damn thing.

    So next time you’re bitching about how you can’t use your phone in San Francisco or New York, remember that you’re also saying that Apple employees shouldn’t be using prototype hardware outside of the Apple campus.

    You want testing in real world situations with real world users. You want this guy to use this phone as if it was his own. To use Facebook and Twitter and play games and talk on the phone and videoconference with Skype and all that sort of stuff that your users will be doing in order to find any issues.

    And if the price is that, occasionally, the phone falls into the “wrong hands” (ie, the press), that’s the price that I, as a customer, am willing to pay for a phone that doesn’t barf when I use it in San Francisco, for a phone that doesn’t have some mysterious glitch when I receive a tweet while playing Backgammon, etc.

  5. Bouke Timbermont Says:

    @Andre: ban Engadget and Gizmodo? Are you nuts? (to use the Steve Jobs words :P)

    So you want to BAN two of the biggest tech-sites for finding a product they are itnerested in, then contacting it’s owner (read the gizmodo story: they contacted the employee in due time), but in the mean time, investigating the, I must say, extremely itneresting thing? Again: are you nuts???

    Gizmodo got a small windows of opportunity and they immediatly took it, AND did the right thing by contacting the owner, and thereby Apple. Apple didn’t respond until later with a formal letter requesting it back. Gizmodo agreed. Case closed.

    Are you telling me you would do anything differently? I don’t think you would.

  6. Ed Oswald Says:

    @Peter – I completely agree. But at the same time, if you’re trying to stay secretive, would you want your equipment in situations like this, where it would easily be misplaced?

    @Andre – what good would that do other than to create more bad press for Apple. Giz is returning the device if their comments are to be believed. I don’t think Apple gains anything by shutting them out..

  7. d204 Says:

    You are aware that even Gizmodo has now explicitly admitted that the phone was stolen rather than “lost”? Gizmodo (or its paid-off thief) manufactured the story about the bar as a cover-up.

  8. Ed Oswald Says:

    I’m curious as to where you’ve seen this.

  9. NanoGeek Says:

    @Marcelo Vaz

    I believe the lost iPhone story. It is completely unlike Apple to allow one of their new devices to slip out like that. It completely ruins the buildup to the announcement. I really doubt they would do that.

  10. Hamranhansenhansen Says:

    Wow. Talk about blaming the victim! What you’re saying is “if Apple hadn’t worn that red dress they wouldn’t have gotten raped.” Nice.

    It doesn’t matter if the person who sold the phone to Gizmodo found it in a bar, once they sold it that is theft. When Gizmodo knowingly bought it from someone who is not the owner, that is receiving stolen property. Case closed.

    > police report

    If the Gizmodo story is true, Apple would not have even known the phone was stolen until they saw it in Gizmodo. Until then, it was a lost phone as far as Apple knew. What turned it from lost into stolen, according to the Gizmodo story, was when their secret Santa offered to sell it to them.

    Further, a police report just starts the police looking for a stolen item. Not filing one does not transfer ownership from you to the thief. And this is not a retail item with millions of copies and millions of owners, it is a not-for-sale prototype, it can only be owned by Apple. It takes absolutely zero work to establish Apple’s ownership of this device. You can’t buy one. You can’t own one.

    Trade secrets is a whole other issue, but even there, you’re on very thin ground to say that testing a device outside of company headquarters puts the inside guts of the device in the public domain. These are devices that run on various 3G towers, various Wi-Fi networks in b, g, and n flavors, at various frequencies, and interact with GPS and Wi-Fi for location services. They give off radio signals that must not interfere with other devices of the kind that users will encounter throughout the world. They had better be testing iPhones somewhere other than 1 Infinite Loop, where I would bet you, all the Wi-Fi is the most modern gear and AT&T 3G is pretty damn good. They may even have to test the device in the wild to get FCC approval.

    I know it’s considered OK in tech to steal from Apple, but c’mon.

  11. Stilgar Says:

    @Hamranhansenhansen This is exactly how I feel too. It’d be hard for my to believe that a technology site like Gizmodo to NOT know there were some shady dealings going on when they bought this iPhone. They know Apple is secretive about their new products. They know you can’t by the iPhone they obtained.

    Would you believe me if I met you and said, “Hey, I’ve got this one-of-a-kind car I’m looking to sell. There’s nothing that looks even remotely like it on the market. When I got it, parts of it were shrouded in an attempt to disguise it. Just wait until you open the hood and see the powerplant!”

    You’d probably have a few questions as to how I obtained it right?

    “It’s cool. I found it in my driveway. Some guy left it there they other night (he may have been impaired). I saw him walking away and told him he parked in the wrong driveway, but he said it wasn’t his car. So now I’m selling it to you!”

  12. Tom Davis Says:

    Has any one taking into consideration that this whole event may have been a way to get Apple some more coverage? They have the whole tech world following this story. So they let out the design of the new iPhone but look at what they have achieved by doing that, they will have every ones eyes on the release date to see if that was indeed the real iPhone.

    Not to mention the release of the iPad is due very soon.

  13. Tom Ross Says:

    I wonder how you could fire that employee based solely on the story of a criminal. Where’s the proof that the incident happened in the employee’s free time, that he was drunk and that he lost it? How can people be so gullible to believe Gizmodo’s story verbatim since they are accomplices in this case?

  14. Tom Ross Says:


    Apple already “banned” Gizmodo some time ago, during Steve’s health problems. Since then, Gizmodo’s stance towards the company has become more and more antagonistic, bizarrely distinguishing between the good products and employees on the one side and the evil management on the other side. They had some pieces casually linking Apple to the Third Reich, communist China or Orwell’s distopia. And they clearly see this as some sort of revenge on Apple. It took that kind of mindframe to justify their crime. They apparently think that they’re fighting evil.

  15. Paul Judd Says:

    Tom Davis,
    This is Apple we are talking about here, they do not need to “accidentally loose a prototype” to get attention – the press is very willing to come to their campus at the drop of the hat.

    Not to mention that the only official announcement from Apple has been a legal announcement of “we want our property back”

  16. jltnol Says:

    and of course, I’d like to know why the phone wasn’t locked? My 2nd gen 3G is new or a prototype, but I keep it locked all the time, just in case I do loose it, or it is stolen. While not impossible to break through, it would slow someone down from using it and getting any info off of it.

    Something seems a bit strange here….

  17. Marcelo Vaz Says:

    @Tom Davis Definitely! Not to mention all the people who were wondering about buying an Andoid phone are now postponing the decision to check this 80gb-with-two-cameras-excelent-display iPhone. I really don’t buy this whole story.

  18. Andre Da Costa Says:

    Bad press? Its already bad press for Apple since it kills the surprise and newness factor of an Apple keynote. The fact is, the guy Jesus intentionally was going to steal what he probably thought was an iPhone 3GS. But later discovered it was more than that. The fact that he went to great lengths to negotiate with both Engadget and Gizmodo over the device show’s that he really had no intention of returning it to Apple or its owner. Especially since it was already sold to Gizmodo for keeps. You really think Gizmodo is gonna say, oh we will just pay you $5,000 to play with it and give it back to you? I think everybody involved in this matter needs to be punished, from the employee (no firing though since he is an engineer with a lot of talent) for his recklessness to Gizmodo to Jesus (not Christ).

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