Apple claims huge loss over iPhone leak; knew who sold prototype to Gizmodo same day story broke

invisibleSHIELD case for iPad“Apple officials told police investigators that the publication of photos of an iPhone prototype was ‘immensely damaging’ to the company and represented a ‘huge’ loss, recently released court documents show,” Gregg Keizer reports for Computerworld.

“Those documents, released Friday by a San Mateo, Calif., county judge, reveal details of a meeting between police and Apple officials that ultimately led to the seizure of several computers from the home of Gizmodo editor Jason Chen,” Keizer reports. “The next day, April 20, Detective Matthew Brand of the San Mateo County Sheriff’s Office met with Bruce Sewell, Apple’s chief counsel, Rick Orloff, the company’s director of information security, and George Riley, a lawyer from the Los Angeles law firm of O’Melveny and Myers, which represents Apple. During the meeting, Riley told Brand that the premature disclosure of iPhone details had been ‘immensely damaging’ to Apple.”

“‘By publishing details about the phone and its features, sales of current Apple products are hurt wherein people that [sic] would have otherwise purchased a currently existing Apple product would wait for the next item to be released, thereby hurting overall sales and negatively effecting [sic] Apple’s earnings,’ Riley said, according to the affidavit Brand swore out for a search warrant of Chen’s residence,” Keizer reports. “When Brand asked Riley to put a dollar amount on the loss, Riley said he could not estimate it, but believed it was ‘huge.'”

Keizer reports, “The affidavit also revealed that Apple knew the identify of the man who sold the prototype iPhone to Gizmodo on the same day that the blog published its story.”

Full article here.

31 Comments

  1. The imbroglio over returning lost property is a matter for the criminal courts.

    The issue of loss, and its size, is a matter for the civil courts.

    It’s like this: If I steal your car, that’s a crime. Have the authorities prosecute me.

    If you lose business because I stole your car, that’s damages. Sue me.

    Apple’s claims of loss, while interesting, should have little bearing on a criminal investigation.

  2. Leaking the update of the hottest product for many years running for a multi-billion dollar company is very damaging for s multitude of reasons that don’t even need to be explained.
    On top of that laws were allegedly broken while profits were made by the offenders.

  3. At the very least, $5,000 is enough to make it a felony. Millions of dollars is enough to drive up the penalty.

    BTW – How do you know the iPhone was left on a barstool? That’s just what Gizmodo said. How do you know he wasn’t targeted?
    If I was pickpocketed, I would have gone home saying, now where did I leave that wallet/iPhone?

    Damn! Must have left it on the barstool.

  4. I saw a man with his 4G sitting on a table at lunch yesterday at my local burrito joint. He noticed that I spotted it, promptly put it in his pocket and left.

    He didn’t have a case on it and it looked just like the leaked photos.

  5. While I am on Apple’s side in most of this, I am rather skeptical about their “huge loss” claim. Given Apple’s now established pattern of releasing a new model every June/July, anybody who wanted an iPhone was pretty much certain that a new one was coming. There were more than enough rumors floating around about the phone’s specs as well. The Gizmodo article did not tell us anything new – it might have confirmed several rumors but nothing more than. I doubt if Apple will lose any more sales than they would have otherwise lost (had this whole affair not occurred).

    – HCE

  6. @HCE
    I was wondering when someone would say that.

    The average person, even iPhone purchasers, do not read tech blogs regularly. They are neither aware of nor care to keep track of the sales patterns of tech companies. They hear about launch dates from mainstream media, not geeks. My friends politely nod their heads as I yak about tech this and tech that, but it’s mostly in one ear and out the other. This reality keeps geeks employed, but it does not lead to a technologically informed society as a whole.

    We may read this stuff, but the world does not revolve around us, Apple, or even *gasp!* Steve Jobs. The consumer costs to Apple are real because even my 93 year old grandfather heard about the Gizmodo uproar. Once the Today Show and CNN – on the frontpage – started discussing the incident, awareness of the product became widespread in a manner that deviated from the norm.

  7. @wiredzen

    I have plenty of friends who have never read a tech blog in their lives and all of them were aware that a new iPhone was coming around June/July. That has been reported on mainstream news websites as well as the tech blogs. The mainstream sites may not have gone into all the rumored features of the phone but I then I doubt if people could name the new features of the 4G iPhone even after this story broke.

    – HCE

  8. “pretty much certain”, is not the same as “certain”, when it comes to a buying decision.

    Yes, the specs were not anything we couldn’t have guessed, but the Osborne Effect is real.

  9. “The affidavit also revealed that Apple knew the identify [sic] of the man…”

    If you’re going to go to lengths to call out other people’s verbal gaffes (even though the quotation marks makes the “sic” redundant), you might want to tighten up your own writing, Gregg.

  10. If it is a BLOG then almost by defintion it is a bottom feeder.

    By lowering the hurdle to enter the public media what we get is every kind of wrong, misleading and most of all self serving BS you can find.

    This isn’t to say mainstream media is without fault, doesn’t make mistakes, and is otherwise without sin…it’s just that an editorial process is just that…it’s a filter for information that in the past precluded what blogs now swim in every day. If you see the word BLOG…you should instantly put on your skeptics hat.

  11. @HCE

    It would be unreasonable to assume that every non-sale of an iPhone since the story broke was due to the leak. It would also be unreasonable to assume it had no effect. That’s why we have courts.

    I think a reasonable compromise would be forfeiture of every dime of revenue made on the story…+ a healthy sum. Message to tech blog community: your financial gain will never offset your losses when you steal to create news.

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