Gizmodo paid $10,000 for “lost” iPhone 4G

Mon, Apr 19, 2010

Featured, News

Update: Steve Jobs talks about Gizmodo, claims they tried to extort Apple

The Internet is abuzz today with Gizmodo’s hands on preview of what appears to be Apple’s next-gen iPhone. In case you missed the build-up to the story, someone found a cased iPhone on the floor of a bar in Redwood City. From the outside, the device appeared to be an iPhone 3GS, but upon removing the device from its specially designed case, it was clear that this was no ordinary iPhone. Rather, it appeared to be Apple’s next-gen iPhone. Found. In the wild. A solid two months before anyone expected to see pictures of it.

In other words, this was the motherload of all Apple scoops.

The individual who found the iPhone sent pictures of the device to Engadget, but it was Gizmodo who scored big by actually obtaining the iPhone itself. It’s been reported by in-the-know Apple blogger John Gruber that Apple considered said iPhone “stolen”, and was keen on getting it back.

But with Gizmodo’s report blowing up the Internet today, the cat is out of the bag. At the time of this writing, Gizmodo’s story alone is bordering on 2.5 million page views [Edit: it's now pushing 4 million pageviews as of early Tuesday morning].

Now word is leaking out that Gizmodo paid a cool 10 grand for the iPhone prototype, which all things considered, seems like a bargain given Apple’s typically tight rein on product leaks.

Update: Apple Legal sends letter to Gizmodo asking them to return iPhone 4G

$10,000 has undeniably diverted a ton of eyeballs to Gizmodo’s site, and the surge in web traffic probably has Gizmodo editors jumping for joy. But you have to wonder if Gizmodo, in the grand scheme of things, tarnished their “relationship” with Apple for a short term spike in pageviews.

Think about it – Steve Jobs is probably livid right now, and what are the odds that Gizmodo, going forward, gets invited to Apple’s always popular “special events.” And what are the odds now that Gizmodo will get a review unit of the upcoming iPhone 4G? Though, to be fair, they apparently already have one.

On another note, there has been talk about Apple legal going after Gizmodo, but that doesn’t seem plausible for a number of reasons. First and foremost, the damage has already been done. The pictures and information gleaned from Gizmodo’s hands-on have already been dispersed into the ether of the Internet. If Apple demanded Gimzodo remove its detailed post, it would a) confirm that the device is, in fact, the next-gen iPhone and b) ultimately have no effect whatsoever given that hundreds, if not thousands, of other websites have already copied and pasted the pertinent information.

Second, it’s hard to see how exactly Apple could go after Gizmodo from a legal standpoint. Word is that Gizmodo purchased the device last week, but it’s unclear if Apple was aware of the exchange, and if so, if Apple sent a legal warning to Gizmodo not to publicize the device. But even if Apple did deliver a legal warning, Gizmodo ostensibly didn’t coerce an Apple employee into handing over a top secret prototype. Rather, Giz simply paid top dollar to a guy who found a different looking iPhone on the floor of a bar. From that vantage point, there’s not much illegality involved.

Matt in the comments directs us to this entry on lost/stolen property from Wikipedia:

Property is generally deemed to have been mislaid or misplaced if it is found in a place where the true owner likely did intend to set it, but then simply forgot to pick it up again. For example, a wallet found in a shop lying on a counter near a cash register will likely be deemed misplaced rather than lost. Under common law principles, the finder of a misplaced object has a duty to turn it over to the owner of the premises, on the theory that the true owner is likely to return to that location to search for his misplaced item. If the true owner does not return within a reasonable time (which varies considerably depending on the circumstances), the property becomes that of the owner of the premises

That said, it would seem that Apple’s legal beef lies more so with individual who sold the device than Gizmodo. Either way, going after Giz or the dude who’s now $10,000 richer would attract a wave of bad publicity that Apple would, we would guess, much rather do without.

Update: A comment from Hacker News directs us to this section of the California Penal Code:

One who finds lost property under circumstances which give him knowledge of or means of inquiry as to the true owner, and who appropriates such property to his own use, or to the use of another person not entitled thereto, without first making reasonable and just efforts to find the owner and to restore the property to him, is guilty of theft.

The question, then, is if the legal responsibility of the original “finder” is transferred over to the party who acquires said property. We’re guessing that it does. Also, remember that Gawker was previously served with a cease and desist letter from Apple back in early January for offering $50,000 for pre-release photos or videos of the iPad and $100,000 for actual hands-on time with the device.

And if that weren’t enough to chew on, Gawker managing editor Nick Denton sent out the following tweet earlier this afternoon:

For people who want to know the backstory to Gizmodo’s iPhone exclusive, it’s coming. And it’s a corker.

Update x2: Gizmodo exposes identity of Apple engineer who lost the iPhone at the bar

Update x3: Gawker editor Nick Denton said that the company paid $5,000 for the device, with some reports claiming that additional fees were to be paid if certain traffic goals were met

Update x4: There’s something off about Gizmodo’s telling of how they received the iPhone

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46 Comments For This Post

  1. Matt Smith Says:

    Probably is illegal. See here: http://en.wikipedia.org/wiki/Lost,_mislaid,_and_abandoned_property#Mislaid_property

  2. LawGuy Says:

    except receiving stolen property, and corporate espionage… both of which could land Gizmodo in a really nasty spot.

  3. Ken Says:

    Except that more likely than not – it was a plant from Apple in the first place to create buzz.

  4. Mike Says:

    Now someone at Apple will have to commit suicide to preserve his/her honor.

  5. Sterling Says:

    I agree with Ken. It’s a plant. The iPad chatter isn’t all that great and they needed to redirect people’s attention. Mission accomplished. Whoever sold Gizmodo the phone is probably an agent of Apple.

  6. OhhJohnny Says:

    Apple doesn’t really send early review units to anyone except USA Today, WSJ and NY Times, so that’s not going to be an issue. Giz isn’t worried about tarnishing their relationship with Apple because it’s not great anyways – they were the ones who scooped that Jobs needed a liver transplant. The main concern should be a journalistic one about ethics, but it’s very dicey.

  7. se7en Says:

    The legal aspects are murky, but Denton didn’t help matters by offering a bounty for the iPad before its launch…kinda puts the “we just happened to buy this thing” defense in a different context.

  8. evan Says:

    basic business law – “thief can’t pass good title”. http://www.lexisnexis.com/lawschool/study/qanda/contracts.asp

  9. robinson Says:

    Sounds unethical and illegal! On the part of both the guy who found it and Gizmodo.

    They’ve probably violated laws pertaining to trade secrets, too.

    Well, off my self-righteous soap box and over to Gizmodo to learn what this is about! (Yes, hypocrisy at its finest!)

  10. daniel Says:

    why would someone have the iPhone 4 prototype at a bar in San Jose anyway? it doesnt make sense for this to be a “find.” the story is made up to create hype for the phone and to change the product according to feedback from gizmodo’s review.

  11. Eli Bishop Says:

    I believe the saying is ‘finders keepers, losers weepers,’ but I don’t know how well that holds up in court.

  12. AAPL.1337 Says:

    complete douchery on the part of gizmodo…
    you paid 10k to get more hits on your site
    and foolishly get your employees killed
    by apple agents gathering personnel intel

  13. John Edgar Says:

    I’m sure gawker has great general council and did a lot of research and consult before posting this.

  14. Bill Says:

    They could be liable under California Trade Secret law.

    This would fit missapropriation under Civil Code Section 3426.1(b)(2)(C) “Before a material change of his or her position, knew or had
    reason to know that it was a trade secret and that knowledge of it
    had been acquired by accident or mistake.”

    It wouldn’t take much to prove knowledge that Apple didn’t want to disclose the next iPhone. It’s also pretty clear that even if Apple did want to, they wouldn’t have done so by leaving it in a bar. The damages under 3426.2 could be pretty huge considering the value of this information to Apple, not to mention that it was willful disclosure.

    Even if Giz made a killing off this, and I’m sure they did, I bet it wouldn’t even cover their legal costs to defend the suit, let alone the damages.

    http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=03001-04000&file=3426-3426.11

  15. will Says:

    meh.

    ugly isn’t it.

    I want unibody.

  16. Ben Spruce Says:

    This could be a viral marketing tactic… yeah, i’m gonna go with that.

  17. will Says:

    looks like a nokia.

  18. ipreferyeti Says:

    Everyone’s assuming that Gizmodo paid to own the device.

    More than likely they’ll simply return it to Apple if so requested.

    I imagine Apple and Gizmodo will come to an arrangement whereby Apple quietly gets the phone back, Giz drops further coverage of the phone up until release day, and then they get an exclusive hands-on with the official device during launch.

  19. Froi Says:

    Following the theory that the finder is guilty of theft, sale AND purchase of a stolen item is generally considered fencing, a criminal offense.

  20. David Says:

    I think when it all comes out, it will be Steve Jobs himself who lost the phone. This is perhaps why you haven’t seen anyone get dimissed yet or the name come out. The bar when it was found is rumored to be only 20 minutes from Steve’s house. I guess we will find out soon enough.

  21. Sophie Says:

    We will see it eventually anyway. So what? People who want to buy it will still buy it, doesn’t matter if Apple’s competitors come up with a similar product or not. It is the power of APPLE, not the device itself. We buy “Apple”, not just a phone.

  22. Josh Says:

    For those asking why the hell would a phone that it not out yet be used in public? When the 3GS was coming out I spoke to a Vodafone employee who had one. He was using it, testing it in “normal world conditions” As most people would not look at it twice if it was masked to look like a current iphone.
    I saw this over 3 months before release so it does happen, I have also lost my phone before, that to can happen.

  23. lkern Says:

    RIIIIGGGHHHTT.
    An Apple prototype just happened to get lost. What are the odds any of those would be cased and in anyones hands leaving Apple?
    ZERO.

  24. John Says:

    Hey Guys,

    Can some one direct me to the nearest unemployment office? It seems I lost my Iphone and I cannot go back to work because my boss is going to rip a new one. So its better I head to the unemployment office instead of going back to work.

    Let me know

    O by the way, I live in California.

    thanks

  25. Miami Says:

    Someone got ripped off… I would have demanded something more like $50,000 ~ $100,000 cash.

  26. sheepbringer Says:

    Even though Apple probably could sue them, why would they? They have nothing to gain other than getting the prototype back. Apple has always played the cat and mouse with this stuff. This time the mouse slipped away. Gizmodo did what they always do and Apple knows that. Apple has always known that.

    If this was an accident (there is no bad publicity…) or not, Apple gained valuable information on HOW this leaked. A drunk employee went under the table and lost the phone. If this was an accident…then oh my, Stevie is going to tear him new one. Still if he did have the phone with him for testing (which they have to do) then there is risk something like this will happen. I just hope they guy informed Apple ASAP and didn’t try to “hide” it. There is a reason why they have remote swipe on the phones…and on prototypes…

    As I’ve said…I don’t think Gizmodo will get sued, but the employee…ouchie. He on the other is probably completely and utterly fubared.

    I can just imagine in the release keynote: So, the iphone…blaa blaa blaa, 3GS is old…so….(then on the keynote screen) “Gizmodo, we are so going to sue you” and then they show the new iPhone 4G, and steve just says “Gizmodo, we are just kidding…for now”.

  27. Keed Says:

    Please tell us some of the stories of how you broke 9 iPhones. Are you like a secret agent or something, always jumping through windows and leaping from helicopters?

  28. Evan Says:

    They could probably press charges against Gizmodo for possession of stolen property.

  29. Matt Says:

    the implications of this article are nothing but stupid.

    You’re trying to say that a website that releases news shouldn’t release news because it could tarnish their reputation?

    get a grip on how that sounds.

    if all news organizations were smart enough to band together and release news whether it was controversial or not, we’d actually have interesting news. good on giz for reporting it whether apple wanted it or not.

  30. Ben Says:

    Dear ‘Matt’,

    Parson me for saying…shame on you. Some observations: Your thinking throws ethics and right out the window. Sort of typical of the average thought process on the internet. I am thinking that you have not a lot of experiance in either ethics training or federal or state law.

    Lets say you lost something of personal value. Now, lets sa ythat it was lost in a business. Then, assuming someone sitting next to your picks it up. This is where the guy who picks up the item does the right thing. He goes to teh manager or owner of the business and turns it in. At the point he pockets it, he knows it is not his own… so by putting it in his pocket he is really stealing. This is both a ethics and legal issue. Let not play a game of ‘finders, keepers” here…. really. The reality here is that by potting the thing in your pocket, the person how ‘lost’ it is losing something. Because you fail to return it your gaing something. To remove something of value from someone else for your gain is… well… stealing. to sugar coat it as ‘found’ shows a breach of ethics and rational thinking.

    So goes intelectaul properties. If you did not develope it, think it up, creat it… it is not your idea. Protection of the person’s (or company’s) rights should be no different. Just because your not a company who can benifit by reproducing the item… benifiting from publishing the inforamtion that you know might harm the person who owns it should be no different. It is harming someone else for your own gain.

    Unfortunately, it is not very well thought out, and smaks of a child who say that possesion is 9/10ths of the law with disregard for what is right or wrong.

    Ben

  31. Mike Says:

    I’d be more worried about the trafficking of stolen goods…

  32. Wilson Says:

    gizmodo played a bad move here, they instead of releasing the pictures of the device for a peak in pageviews, they could have negotiated with apple for the amount of money that pageviews peak is gonna produce and 10k back, and get a exclusive hands on when the device is ready.

    apple is happy,
    gizmodo is happy,
    everybody is happy!

  33. Ben is smrt Says:

    I think it’s funny that you’re calling someone out for being an intellectual inferior and your puncuation, spelling, and grammar is atrocious

  34. Ben for Ben is smrt Says:

    Thanks…. an english lesson. Now THAT is superirority! LOL

    Lets talk about content and not get distracted by the little BS!

  35. Dave Says:

    …motherlode

  36. Nicholas Biddle Says:

    Gizmodo can be liable for receipt of stolen goods under Cal. law and I’m sure they knew that when it happened but decided to hedge their bets that Apple wouldn’t pursue it. The finder created intent to commit larceny when he sold it to Giz knowing that he didn’t have rights to the phone. This creates the theft, which Gizmodo and every citizen of the world would know that the phone would be suspect unless Steve Jobs personally ordered it. If Apple does pursue charges, Giz could land jail time, fines, etc under Cal. sentencing law.

    The real problem for them is Corporate Espionage and violating Trade Secret law in California(as pointed out above). Gizmodo would be liable for any compensatory, incidental, consequential, punitive damages CA law allows. Considering the publicity and amount of trade secrets that Giz exposed, they better hope they made a lot of money off the hits that post created. No matter what if Apple wants to go after Giz and wins, Giz will lose a lot of money on the deal.

    Giz bought the the thing. Took it apart and took pictures of the innards that represent millions in Apple’s R&D. I’m glad they did cause the phone is amazing but they broke the law.

  37. Jon Says:

    Apple / The State DA would also have to prove that the person who sold it did not attempt to find the original owner. Under Finders law, the Finder has claim over any other but the original owner. And after a certain amount of time, the object passes into his possession at which time he is able to do whatever the hell he wants with it.

    Also this is not mislaid, it falls under lost. “Property is generally deemed to have been lost if it is found in a place where the true owner likely did not intend to set it down, and where it is not likely to be found by the true owner. At common law, the finder of a lost item could claim the right to possess the item against any person except the true owner or any previous possessors.”

    I doubt the owner meant to leave it on the floor of a bar, and it was in a spot he was unlikely to find it again. Ergo, this qualifies as lost, not mislaid as it would have been if it was on the counter.

    And before anyone makes the “It’s an arbitrary distinction” or “What’s the difference” arguements, law has specific wordings for a reason. There have been much more specific nitpicks that have gotten through before.

  38. Tam Says:

    Fake.

  39. Alberto Says:

    Of course is illegal, the man who found the iphone knew the owner because he saw his facebook account.

    It was as simple as send him a message telling, Hi I have found your phone, call me….

    Why try calling Apple, asking for “someone” that has lost “something”,…odf course,..this is not the faster way to find the owner,….

  40. L K Neutz Says:

    The Apple Iphone that was lost near Apple headquarters could have been easily found and retrieved, but Apple left it out in the wild hoping attract some attention. Like a fishing lure, it was slowly dragged across the Internet until April, 20th when it hit the National News. Why do I think it was a media stunt…. read on.

    I recently lost my Iphone at Alpine Meadows Ski Resort in Northern California, and by luck or dumb luck, I had signed up for “Mobile me” the week before. I was able to sign in and see that my phone was not lost high up on the mountain, but lurking somewhere around the lodge. I did panic when I was able to see that it was taken to the parking lot and was in one of the cars. I sent messages to the phone saying, ” Please bring this phone to the lost and found”, and it played the irritating “sonar” sound for 2 minutes. I sent 4 messages then remotely locked my phone with a new pin number. After 2 hours, I was finally reunited with my phone. The point being that Mobile me works pretty well for locating your phone and communicating messages to the phone even when it’s locked.

    My point is that Gray Powell, the Apple engineer, had the same technology at his fingertips. He could see the phones GPS location using the Mobile me “Iphone Locator” and send the Phone messages. If I found a phone and and someone offered a reward of $100, I would try to get it back to it’s owner. I sure it would have cost Gray a lot more if he was actually fired. A hundred buck would be nothing to get back top secret technology. But Gray, didn’t send messages to the phone or track it to home of the person who either stole or found the secret phone. Gray could have knocked of the door and said, ” Hey, I lost an Iphone at Gourmet Haus Staudt….Did you find it?” But I am guessing that Gray sometime the next day, realizing his phone was gone, logged in, and killed the phones software sending it to “brick mode”, untrackable and unable to receive messages.

    If Gray had applied a pin code of 4 numbers, there would have been 10,000 permutations of the pin code to get back into the phone. At 4 seconds per try, it would take a determined person on average 5.5 hours to hit the right pin with a maximum time of 11 hours. They could have remotely changed they pin every few hours to thwart anyone from cracking the pin, although you can make the phone non-findable in the settings once you were “in” or set the phone in “airline mode” So, Gray probably made the right choice not to put a pin on the lost phone, but by doing so he could no longer track the phone. One would think, if you could track it, a company as influential as Apple, could get the assistance of the local law enforcement to arrive at the door of “the finder” and demand the phone. But, Apple chose to “brick” it a let if be examined by Gizmodo, the question of the day is…why?

    The only conclusion would be that they wanted the phone found to add hype to it’s future release in mid June. Yup, it’s been confirmed that AT&T has canceled vacations in June and Apple has booked the Yerba Buena Center which indicates the immanent release of something big. But the circus atmosphere by letting the phone be found and confirmed by the April 19th letter from Senior Executive Bruce Sewell indicates that Apple wants us to see the phone but not the software. They could have found the phone easily in the first 24 hours, but chose to let it get to the National News Media before they reeled it back in, and just like a million hungry fish, the lure Apple used got our attention.

  41. Chris Nash Says:

    Hello People, it’s the Wizard of Jobs at work here! This is just the savviest Tech Company in all of the land pulling the strings! It’s free (or $10k is still cheap) Marketing for an Nth generation product that needs new hype givin that they just launched the new Flagship Product recently! Is it making sense yet people… Prior experience led readers right down the path Apple expected, and has paid dividends already to the Marketing Dept!!!

  42. Gotcha Says:

    JUST FOUND!!!! Second generation iPad, left on table at Anchor Bar in Buffalo, NY!!!! Covered in chicken-wing grease it was nearly unrognizable until a non-Buffaloian spilled his beer on it and saw it glimmer in the bright Buffalo Sun light pouring through the bay window, LOL :-)

  43. Marconi Says:

    Funny at the end pf the post lays an ad of the iphone 3gs that reads “it’s beautiful”.

    Because the prototype or whatever it is, is ugly.

    If this is the real thing, the design is a huge step away from beautiful iPhone…

  44. RJM Says:

    I guess the phrase “checkbook journalism” has no meaning in the blogosphere.

  45. Steve Jobs Says:

    Hey, does anyone know how I can get that back, it’s caused me a lot of lost sleep and worrying. If theres anyone from gizmodo here please contact me.

    Thanks,
    -Steve Jobs

  46. DontMatter Says:

    It’s amazing how illiterate people are or how low reading comprehension skills they have.

    Almost all the comments are off. Even *apparently* very smart and knowledgeable people like “L K Neutz” don’t “get” or pick upon certain very common sense things, like:

    Apple doesn’t NOT need any more media attention. They are the top. They don’t have to play stupid (and very risky if you think about it) games to get more. They can always call upon reporters and they’ll flock to Infinite Loop immediately, etc.

    The list goes on… So sad the state of people on the internet. I mean shit, it just takes a little careful reading and research to get to the actual facts, instead of just knee-jerk-reaction type comments like you see all over the place. So sad.

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