Gizmodo Faces Likely Criminal and Civil Charges over iPhone Episode

While Gizmodo has certainly succeeded in inserting itself in the news cycle, it may not realize exactly just how much trouble it put itself in.
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By now everyone knows what occurred last month regarding Gizmodo's decision to purchase a Apple prototype iPhone: Gizmodo posted several offers to access to unreleased Apple products so it could post the information on its tech gossip website. Shortly thereafter an Apple employee carelessly left a next generation iPhone prototype at a bar where he was celebrating his birthday. An anonymous individual found the iPhone at the bar and sold it to Gizmodo for $5,000 in cash. Gizmodo then spent seven days examining the iPhone before posting information about the prototype on its website. Gizmodo eventually returned the phone to Apple, but it refused to take down the information about the phone from its website.

While Gizmodo has certainly succeeded in inserting itself in the news cycle, it may not realize exactly just how much trouble it put itself in. In California it is a felony to receive stolen property valued at over $950, which carries up to a year in prison. See Penal Code § 496. Gizmodo will certainly argue that the iPhone was "found," not stolen, and that even if it was stolen, Gizmodo didn't know the phone was stolen.

First, was the iPhone stolen? Under Penal Code § 485, "[o]ne 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." Here, someone found a prototype next generation iPhone at a bar and immediately sold it for $5,000 in cash. There is no evidence the individual who found the phone tried to return the phone to its owner, or that he even waited any substantial period of time before selling the phone to Gizmodo. Clearly, the iPhone is considered stolen under California law.

Next, did Gizmodo know the phone was stolen? While Gizmodo has already asserted that it "didn't know [the iPhone] was stolen when we bought it," there is more than enough evidence to support a conviction. The seminal California case on the topic, People v. Boinus, 153 Cal.App.2d 618 (1957), discussed exactly this type of situation and held that a jury may infer that the purchaser knew the property was stolen from the circumstantial evidence:

Although guilty knowledge of the fact that the property was stolen is an essential fact to be proved in a prosecution for receiving stolen property, such knowledge need not be that actual and positive knowledge which is acquired from personal observation of the fact. It is not necessary that the defendant be told directly that the property was stolen. Knowledge may be circumstantial and deductive. Among the elements from which knowledge may be inferred are that the property was obtained from a person of questionable character, and the failure of the accused to satisfactorily explain his possession. Possession of stolen property, accompanied by an unsatisfactory explanation of the possession or by suspicious circumstances, will justify an inference that the property was received with knowledge it had been stolen. It is enough if, considering all the evidence, which may be circumstantial, an inference of guilt may be found.
Id. at 621-22.

The circumstantial evidence in this case strongly suggests that Gizmodo knew the phone was stolen. If it weren't stolen, why would they have agreed to pay $5,000 for it? The fact that the phone had it data erased remotely shortly after it went "missing" even further suggests the phone was stolen.

In addition to facing likely criminal charges, Gizmodo faces a potentially damaging civil lawsuit as well. California is very protective of company's intellectual property rights and anyone found liable for misappropriation of trade secrets is liable for the damage caused and any financial gain to the person or company guilty of misappropriation. Civil Code § 3426. And, where the misappropriation is intentional, the court may award double damages. Under California's Uniform Trade Secret Act, "any person has a duty not to use trade secrets the person knows have been improperly obtained by others and is liable for misappropriation under such circumstances." Core Wealth Management, LLC v. Heller, 2010 WL 1453068 (2010). Here, as noted above, there is plenty of circumstantial evidence to suggest that Gizmodo knew the prototype iPhone had been improperly obtained, and thus Gizmodo had a duty not to publish such information. And, given the evidence surrounding how Gizmodo obtained the prototype iPhone, there is a very good chance a court would award double damages.

Gizmodo may have felt it pulled one over on the tech giant by posting information on the super secret next generation iPhone, but in the end, Apple will likely have the last laugh.

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