Summary: Recently Apple successfully sued a number of Apple-enthusiast websites who posted pre-release information on unreleased products that was a bit too accurate for Apple's tastes. In today's article, Alan quickly goes over the details of the case and why it could have significant reprecussions on the entire online world of online journalism.
Recently, Apple Computer successfully sued a number of “bloggers” running Apple rumor websites, forcing them to divulge their source of leaked Apple information. In this precedent-setting lawsuit, it was determined that posting leaked information was in effect theft of protected trade secrets. This ruling has significant reprecussions beyond leaked rumors and may be a major setback for online journalism.
Summary of the Case
I’ll start by summarizing the case as briefly as I can for all of us non-lawyers. Keep in mind that this is designed to just highlight the important points of discussion and is not a comprehensive discussion.
There’s not much to say about the decision itself – if the websites indeed divulged trade secrets, they were inherently a party to a crime and hence not protected. They were doomed to begin with. The fundamental issue is then the definition of a trade secret. There were several factors that go into this: is the information widely known outside the corporation? How much information was known by the corporation’s employees? What measures were taken to guard the secrecy? What is the value of the information to the competition? How much money was involved in developing the information? The websites clearly faced an uphill battle here because what was published was not merely a vague description of an upcoming product, but a copy of a detailed drawing of Apple’s products taken from a slide labeled with Apple Need-to-Know Confidential.
The Big Picture
The relationship between journalists and corporations has always been a Cold War. It’s the threat of mutually assured destruction that keeps everyone working together. On the one hand, corporations would love to be able to control everything that is published. They could ensure that only positive reviews and news were released. In their perfect world, if you published a negative review they could sue your for libel! In fact, this happened in 1984 when the Bose Corporation sued Consumer Reports for libel and actual malice. The complaint was that the reviewer wrote that Bose loudspeakers caused sounds of individual music instruments to “wander about the room” when Bose insisted that they merely wandered “along the walls.” By claiming that the sounds wandered about the room, Bose claimed that Consumer Reports was perpetuating a lie that would hurt their brand-identity. The scary part is that Bose won their case. It was only after the Court of Appeals reviewed the case was the decision reversed.
The Apple ruling has potentially significant ramifications on reporting of products prior to the actual ship date. It’s very tempting to tell yourself that this only deals with rumors, and even the judge himself declared that his ruling was not intended to prevent the exchange of ideas or speculation of the future.
However, consider this “doomsday” scenario. Suppose I’m the big-bad company now and I provide journalists with pre-release information about my product under a NDA so that writers will have time to prepare their articles. No, that’s not the doomsday scenario – that’s the modus operandi for the industry. However, in my presentations not only do I detail all the strengths and advantages of my product, but I also have a hundred slides detailing the weakness of my product in hundreds of different benchmarks. This information has not been divulged to the public – anyone viewing this slide presentation will have signed a NDA recognizing that the information contained within my slides are trade secrets. My launch date approaches, and so I then retract the NDA so that journalists can publish their stories, but I only retract the NDA for slides detailing the positives elements of the product, leaving the NDA intact for all my negative aspects.
Would reviewers be bound to keep this information private in their final article? It’s hard to say, and at this point it’s worth pointing out that most online journalists covering PC gaming and hardware aren’t lawyers – I can only think of one former gaming journalist. But that’s the point.
Using the traditional trade secret standards, you could argue that the slides capturing the weaknesses of my product were trade secrets. It fits the definition of “information, including a formula, pattern, compilation, program, device, method, technique, or process that derives independent economic value from not being generally known and not being readily ascertainable and is subject to reasonable efforts to maintain secrecy." The information is not widely known outside the corporation, or by many of my employees. I have taken extensive measures to ensure that only people with signed NDA’s viewed the slides detailing the negative benchmarks, and obviously the value of the information to the competition is immense.
So on initial survey, such a strategy does seem like it might work. But then you’d say that if journalists were able to independently come to those conclusions from analysis of known facts, that it’d be open game. There’s no way I would be able to prevent an end-user from purchasing my product from a store, and then running benchmark X and showing how poorly my product performs (although I would try a legally-untested end-user license agreement to do that). The problem here is that, a journalist would still have trouble defending himself against a lawsuit.
The journalist, looking to tell the story how it is, would probably review my product and include a discussion of all the negative aspects of my product. As an evil corporation, I could argue that the journalist had been misappropriating trade secrets given to him under the condition of secrecy. Of my 100 benchmarks showing how poorly my product performs, I could point out that journalist has historically only benchmarked a handful of tests. Would the journalist have even thought to run those benchmarks if I didn’t give him the results prior? Would he even think about testing for this negative if I didn’t mention it to him in that presentation? There is no way the journalist can document that he 100.0% came to the information independently because the journalist didn’t even know about the existence of my product until I briefed him on it. It’s automatically confounded.
Interesting thought, no? Common sense would say that protection of trade secrets shouldn’t apply to restricting information, but common sense isn’t how the legal system works. It’s very precise.
Suppose there’s an independent journalist who hasn’t signed the NDA and obtained my product at retail. Could he have independently run benchmarks and come to those conclusions through independent analysis. Well, as the evil corporation I could say “hey, no one would think to test my product using benchmark Y – someone with access to my original NDA’d slides.” I could proceed with a lawsuit against a John Doe and then subpoena that independent non-NDA’d journalist, offering only to retract the subpoena if his article was pulled. Remember, most reviewers aren’t lawyers – they’ll freak out...
The situation with Apple was very different and the above wouldn’t be realistic. The problem is that what the websites did with “leaked” Apple product information isn’t really unusual. This happens ALL the time – it’s like driving faster than the speed limit. Apple just got pissed enough to strike back and sought to change the status quo and they won.
Are Bloggers Journalists?
The media hypes up bloggers as if they’re the next dot.com boom. In truth, bloggers are no different from journalists although they may update more frequently and write with a far more informal style. In fact sites such as Anandtech, started as a blog on Geocities. In terms of investigative reporting, I’m not sure I can argue there’s a difference between someone actively calling up contacts and meeting with inside sources versus someone with a mailbox saying “give me information” such as many rumor mill sites, so long as an effort is made to assess the plausibility and authenticity of the story. Legally, a journalist simply needs to be someone in the “process of investigative reporting or news gathering” and “have the intent at the beginning of the news-gathering process to disseminate [the] information to the public.” Bloggers clearly meet this definition.
What happens now? No one really knows. Without question, journalists with access to leaked information should tread lightly, and insiders who have leaked information in the past are clearly thinking twice. It goes without question to say that this issue is not resolved. Apple won this round, and as much as I think this ruling will negatively affect the online-press and “second-tier” news sources such as bloggers, I won’t fault Apple for looking out for their short term interests and playing their cards right. Still, I think they’re underestimating the value of the viral marketing available with early information. Even if no appeal is filed, it’s virtually certain that we will see similar lawsuits in the future, but with different parties. Likewise, the lack of legal comment on the definition of a journalist in today’s WordPress and MovableType world doesn’t mean that we’ll be able to ignore that forever. We can only hope that the balance between corporate and reviewer interests returns to its equilibrium.
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