Apple vs. Gizimodo: Protection of Trade Secrets

By now everyone has heard that Gizmodo’s Editor, Jason Chen’s, home was raided by authorities last week.  The police seized computers and servers in an effort to ascertain how he obtained the stolen i-Phone 4G prototype phone.  Gizmodo admitted they paid $5000.00 for the unreleased prototype and refused to reveal their source.  The knew the phone was stolen and yet they still displayed and discussed the unreleased i-Phone 4G prototype on their website.

Of course Apple did not take their actions too kindly and promptly launched an investigation.  Chen and Gizmodo are claiming the search warrant was unlawful because he deserves reporter’s privilege.  However reporter’s privilege has never extended to a reporter who knowingly commits a crime or aids and abets in the commission of a crime.  They are many arguments regarding what type of crime was committed by Chen, Gizmodo, and the employee that “allegedly” left the phone at a bar.  However, I argue that Apple has every right to pursue prosecution based on California Law concerning “Theft of Trade Secrets.”

Trade Secrets

Trade Secrets are a type of intellectual property.  A trade secret can be a formula, practice, process, design, instrument, pattern, or compilation of information which is not generally known or reasonably ascertainable to the public.

Some examples of Trade Secrets are:
1. Formula for the soft drink, Coca-Cola
2. Business processes
3. Marketing Strategies
4. Food Recipes
5. Computer Algorithms
6. Prototypes
In addition, the trade secret must be of an economic advantage over a business’ competitors or customers. Lastly, the owner of the trade secret must take reasonable efforts to maintain its secrecy.

Apparently Apple is upset that Gizmodo has exposed company’s trade secrets of the prototype.  Of course if Apple’s competitors have been watching surely this exposure lessens Apple’s competitive advantage over the competition.  But knowing Apple, they will simply raise the stakes and change the design.

Consequences for Theft of Trade Secrets

Under California Law, the acquisition by improper means of trade secrets (meaning by theft, bribery, or breach of duty to maintain secret) is a punishable criminal crime and civil liability. California Civil Code Section 3426.1-3426.11 California law also holds the receiver of a trade secret liable if the receiver “knew or should have known” that the alleged wrongdoing was occurring. California Civil Code Sec. 3426.1(b).

Clearly Chen and Gizmodo knew that they had received the i-Phone 4G prototype, unlawfully.  Therefore according to California Statute they are guilty of Theft of Trade Secrets.

In addition the California Penal Code states Theft of Trade Secrets is a crime and punishable by imprisonment in state prison or county jail not to exceed 1 year. California Penal Code Sec. 499 (c). I gather this is why the authorities raided Chen’s home in an effort to ascertain whether they have enough evidence to prosecute Chen under this code.

One thing is clear.  Apple has put the public on notice that they are not tolerating any such leaks in the future.

About the Author
Latoicha Givens is the founder and a member of the firm Phillips Givens, LLC. Ms. Givens practice includes represention of start-ups, small, and mid-sized businesses in intellectual property matters, specficially, trademarks, copyrights, and licensing issues. She is the author of IPLAW101.com, a blog covering Intellectual Property issues specifically trademark law - trademark registration and infringement; Domain Name Disputes: Cybersquatting; Licensing and Intellectual Property issues in New Media.
See all posts by Latoicha Givens.