Thursday, January 20, 2005

Apple sues 19 year old over disclosure of trade secrets

AP reported that Apple Computer filed a trade secret lawsuit on Jan. 4, 2005 in Superior Court in Santa Clara County against Nicholas Ciarelli, the publisher of the site and a 19 year old Harvard University student. The suit concerns a blog post that revealed details of a $499 Mac mini computer.

California has adopted a version of the Uniform Trade Secrets Act. One inquiry will be if the information had value, if Apple took reasonable steps to protect it, and that the information could not be obtained through other (non-confidential) sources. Ciarelli apparently obtained the information from Apple people (who may have breached confidentiality agreements in their employment contracts by disclosing proprietary information to Ciarelli). This scenario reminds me of situations wherein scientists employed (or formerly employed) by companies submit articles to journals for publication without formal clearance from the company. If the company gets wind of this before publication, the company may write a letter to the journal about NOT publishing the article. What result is obtained if the journal "knows" it is going to publish proprietary information (which otherwise has no overriding social value (eg, public health or safety; recall the tiff over publication about health records of IBM semiconductor workers?))?

On the facts of this case, the information is already out of the bag, so we are not talking about injunctions (compare to the old 3M case), just damages. Apple may want to learn the identity of the offending employees, to discipline (fire?) them. Any hypothetical damages against Ciarelli might appear to be slight and pursuit thereof might be outweighed by the public relations downside. Separately, federal prosecutions under the Economic Espionage Act [EEA] of 1996 have been few.

Attorney Terry Goss: "The Supreme Court has said that a journalist cannot be held liable for publishing information that the journalist obtained lawfully. Think Secret has not used any improper newsgathering techniques. We will be filing a motion asking the Court to dismiss this case immediately on First Amendment grounds under a California statute which weeds out meritless claims that threaten First Amendment rights." [The Register]

Matthew Gline of the Harvard Crimson went into greater detail:

[The suit] alleges that Ciarelli induced employees of Apple or Apple affiliates to reveal proprietary information in violation of contractual agreements, and then released known trade secrets to the public. These employees are also targeted by the lawsuit, though their names are not yet known: Apple hopes to compel Think Secret to release the details of its communication with its sources so that the company can ascertain their identities and seeks damages from Think Secret directly for publishing its findings.

There are important questions raised here that are essential to understanding the rights and responsibilities of news sources (for example, The Crimson)—particularly as the definition of “news source” expands in the era of the Internet to include blogs like Ciarelli’s Think Secret. The first of these is on the efficacy of a free press. Can someone in the media publish information if their source obtained that information illegally? It seems the obligations of the press ought generally to lie with the public, and not with personal or corporate interests. Still, we make exceptions to this in cases of slander or libel—might we also want to make one in this case?

The United States Supreme Court has addressed this issue several times, including in Bartnicki v. Vopper, a 2001 case involving negotiations between a Pennsylvanian teacher’s union and a district school board. During the discussions, an inflammatory cell phone call was illegally intercepted and the tape of that call was passed on to an anti-union intermediary, who gave the tape to Vopper, a radio news commentator. Vopper, knowing that the tape had been obtained in violation of wiretap and other privacy laws, aired it anyway. The court ruled that this was acceptable: “Privacy concerns give way when balanced against the interest in publishing matters of public importance.”

The situation with Think Secret is, of course, quite different from that in Bartnicki. For one, the interest being protected is not privacy in the broad sense but is rather a corporate trade secret. We also ought to ask whether the information about upcoming product announcements counts as a “matter of public importance.” It does appear that Think Secret’s actions are in violation of the California Uniform Trade Secrets Act, as Ciarelli probably knew that what he was disclosing had been “derived from...a person who had utilized improper means to acquire it.” And Apple, as their claim makes clear, most certainly takes steps to protect the privacy of information of the sort that was revealed.

So the question we must ask is, does the concern of protecting trade secrets give way as the wiretap concerns did? The answer appears intuitively to be “sometimes.”

Suppose I’m publishing an article about migraine medication, and a drug company representative mentions that his company has launched an internal investigation to determine if the drug causes severe heart problems. I’m then told by a supervisor that the information about the study is a trade secret, that the person I spoke to was in violation of his contractual agreement with the company, and that I am not to disclose what I’ve heard on threat of civil action. It seems in this case that I should be protected if I choose to provide this information: If I’m to be allowed to weigh fairly my claims about medications, I ought to be able to rely on everything I know.

On the other hand, what if the subject of my book is a television buying guide, and the proprietary information is that Sony is releasing a better, cheaper model of a high end television in two months time? Well, revealing this information might make my book on televisions more informative, but it also amounts to transferring money to my readers from Sony. In this case, which feels analogous to the Think Secret suit, the weight of the competing claims seems to depend on the complicated economic effects of granting this right to either party.

We ought to be able to come up with a law that properly distinguishes between these situations if economic analyses demonstrate the need; years of legal precedents including Bartnicki have tried. Still, even in such ambiguous circumstances, we must rely, when in doubt, on the Bill of Rights. It guarantees us freedom of the press, and this is a freedom not to be lightly infringed upon. Otherwise, as McKay Professor of Computer Science and former Dean of the College Harry R. Lewis ’68 suggests (not, as it were, on condition of anonymity), it would be advisable for University Hall to place everything in folders labeled “trade secrets:” Surely this would give them good recourse against the prying eyes of Crimson reporters. [end]


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