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TMO Reports - Apple Handed Major Defeat as Appeals Court Sides with EFF
by , 4:50 PM EDT, May 26th, 2006
Apple Computer was handed a major defeat in its efforts to root out internal leakers by accessing the e-mail records of Web sites that had published leaked information about unannounced Apple products. In a 69-page ruling, the California Court of Appeals, 6th Appellate District ruled in favor of PowerPage publisher Jason O'Grady and AppleInsider publisher Kasper Jade, saying that online journalists are entitled to the same protections accorded by California's Shield Law as traditional media reporters are, and that the Stored Communications Act prohibits a litigant (Apple) from gaining access to private e-mail communications through a third party ISP.
"Today's decision is a victory for the rights of journalists, whether online or offline, and for the public at large," said EFF Staff Attorney Kurt Opsahl in a statement. "The court has upheld the strong protections for the free flow of information to the press, and from the press to the public."
The Case
The case involved the publishing of information about a product Apple ended up not releasing called Asteroid, a FireWire breakout box designed to make it easy to use real instruments with Apple's then-new GarageBand. Both AppleInsider and PowerPage published details of the product, reports Apple said were based on confidential materials that constituted trade secrets.
Apple sued 25 John Does, presumably Apple employees and others covered by NDAs with Apple, and then subpoenaed Messrs. O'Grady and Jade for access to their e-mail records in order to determine the identities of those John Does.
When the subpoenaed parties invoked the California Shield Law, Apple argued with the trial judge that they were not legitimate members of the press, and that they merely engaged in the act of misappropriating and disseminating trade secrets. Accordingly, Apple argued, they were not entitled to Shield Law protections. The trial judge ruled in Apple's favor on these issues, but the Appellate Court disagreed.
California Shield Law
The issue of whether or not PowerPage, AppleInsider, Think Secret, or any other Mac "rumor" site are legit members of the press is an issue that has garnered fierce debate everywhere from the Mac Web to traditional newspaper circles, and everything in between. While a variety of old and new media publishers weighed in on the topic because of this case (including friend of the court briefings on both sides), most defended online news outlets (or blogs, depending on who was doing the talking) as legit news outlets.
It was on this issue that the court made one of its most decisive rulings, and perhaps the more important ruling in the case when it comes to having an effect outside of the world of Apple.
"We decline the implicit invitation to embroil ourselves in questions of what constitutes 'legitimate journalis[m]'," wrote the court. "The shield law is intended to protect the gathering and dissemination of news, and that is what petitioners did here. We can think of no workable test or principle that would distinguish 'legitimate' from 'illegitimate' news. Any attempt by courts to draw such a distinction would imperil a fundamental purpose of the First Amendment, which is to identify the best, most important, and most valuable ideas not by any sociological or economic formula, rule of law, or process of government, but through the rough and tumble competition of the memetic marketplace." [Emphasis added]
In an interview with TMO, EFF Staff Attorney Kevin Bankston said, "I'm very excited that the court recognized the fact that Apple had failed to exhaust its other sources. It went straight to the journalists, which it shouldn't have done."
The Stored Communications Act
The court also ruled that Apple's request to obtain e-mail records started by a third party, particularly by Jason O'Grady's ISP Nfox, violated the Stored Communications Act (SCA). PowerPage and AppleInsider asserted that the SCA protected them from Apple's efforts at discovery through Nfox, while Apple asserted the SCA included exceptions that applied to civil cases such as Apple's. The court ruled vociferously against Apple on this point, saying:
"Ironically, Apple accuses petitioners of circular reasoning when they point out that if a contemplated disclosure is not authorized by the Act, the refusal to disclose cannot subject Nfox and Kraft to sanctions, and the disclosure cannot be incidental to the protection of their interests. This is at best a "tu quoque" argument, seeking to excuse the circularity in Apple's argument by accusing petitioners of the same vice. But in fact petitioners' argument is sound, while Apple's is not."
Furthermore, in its opinion, the court said that permitting such civil discoveries through third parties such as ISPs acting as information conduits would impose too much burden without offering a corresponding benefit.
"Prohibiting such discovery imposes no new burden on litigants," the court wrote in its ruling, "but shields these modes of communication from encroachments that threaten to impair their utility and discourage their development. The denial of discovery here makes Apple no worse off than it would be if an employee had printed the presentation file onto paper, placed it in an envelope, and handed it to petitioners."
Mr. Bankston hailed the ruling as a victory for online media through the country, saying: "In addition to being a free speech victory for every citizen reporter who uses the Internet to distribute news, today's decision is a profound electronic privacy victory for everyone who uses email. The court correctly found that under federal law, civil litigants can't subpoena your stored email from your service provider."
Looking outside Apple
As pointed by TMO readers in the comments, this case was a California state case, and as such holds precendent only in California.
Mr. Bankston pointed out, however, that many e-mail providers are located in the same district. "This could have an impact on similar cases in other courts."
"Other courts could find this persuasive," he added.
Both Apple and Jason O'Grady declined request for comment on the ruling. In discussing the case with The Mac Observer, the EFF pointed out that Apple can seek review by the California Supreme Court within 40 days.
Brad Cook contributed to this story.
Observer Comments
Fri May 26, 2006 5:34 pm Subject: Apple Handed Major Defeat as Appeals Court Sides with EFF
QuoteTiger wrote:
Every business in America has just had a large blunt instrument shoved up their backside. Employees now have license to steal and give away secrets. So much for protecting businesses in this country from disloyal and disgruntled employees.
The backlash from this could be fascinating.
This is different from whistle blowing on government corruption, industrial hazards such as exploding batteries, or stuff like that. In my opinion the blog is in a similar situation to a pawn shop selling stolen goods. Well the the court has a different opinion so Apple, and us stock holders, need to move on.
“Don't worry about people stealing your ideas. If your ideas are any good, you'll have to ram them down people's throats.”
Howard Aiken, Computer Scientist
The Appeal Court that decided the matter was a California State Appeal's Court deciding California law. Accordingly, the decision only applies in California. SO, I do not see how business' across the country have anything to worry about.
Moreover, EFF's argument was only that Blogger's should be treated the same as traditional journalists. In California, a company can go to the journalist for information only after exhausting other sources, such as doing an internal audit.
Moreover, the Court was not convinced a tradesecret was involved.
Fri May 26, 2006 6:40 pm Subject: ah but it was a trade secret
There in is the rub. I guess what this says is that once a trade secret is leaked, no matter who does it, it is free game for anyone to publish about. And just because it was only California is just a testament that Apple could want to appeal to the supreme court. What if the supreme court decided against Apple?
Fri May 26, 2006 7:43 pm Subject: Apple legal team regroup
Intruder: This was the 6th Circuit Court, a state court. The 9th Circuit you mentioned is a Federal court, and not related to this case.
Also, just in case it got lost in our longish article, the appeals process would take this case to California's Supreme Court (as opposed to the US Supreme Court). I do not yet know if Apple could appeal a Calif Supreme Court ruling to the US Supreme Court.
As I understand it, however, the US Supreme Court stopped hearing cases that didn't involve Federal law more than a decade ago (any attorneys are encouraged to correct or improve that comment!).
Fri May 26, 2006 10:05 pm Subject: I think the eminent domain law was non-Federal
till the most recent ruling by the Supreme Court. Correct me if I'm wrong?
http://www.foxnews.com/story/0,2933,160479,00.html
Fri May 26, 2006 11:01 pm Subject:
QuoteBryan wrote:
Intruder: This was the 6th Circuit Court, a state court. The 9th Circuit you mentioned is a Federal court, and not related to this case.
Also, just in case it got lost in our longish article, the appeals process would take this case to California's Supreme Court (as opposed to the US Supreme Court). I do not yet know if Apple could appeal a Calif Supreme Court ruling to the US Supreme Court.
As I understand it, however, the US Supreme Court stopped hearing cases that didn't involve Federal law more than a decade ago (any attorneys are encouraged to correct or improve that comment!).
Oops. My mistake!
I would think, though, that Apple could contest the applicability of the 1st Amendment here. That could go to the Supreme Court, could it not?
QuoteIntruder wrote:QuoteBryan wrote:
Intruder: This was the 6th Circuit Court, a state court. The 9th Circuit you mentioned is a Federal court, and not related to this case.
Also, just in case it got lost in our longish article, the appeals process would take this case to California's Supreme Court (as opposed to the US Supreme Court). I do not yet know if Apple could appeal a Calif Supreme Court ruling to the US Supreme Court.
As I understand it, however, the US Supreme Court stopped hearing cases that didn't involve Federal law more than a decade ago (any attorneys are encouraged to correct or improve that comment!).
Oops. My mistake!
I would think, though, that Apple could contest the applicability of the 1st Amendment here. That could go to the Supreme Court, could it not?
I agree. There is an undeniable element of that 1st amendment here.
Sat May 27, 2006 11:18 am Subject: Protecting the blogs
QuoteGuest wrote:
Did the sentence differentiate between the source (i.e., a possibly disgruntled employee) and the website that publishes what the source gives them? I would imagine that the repercussions towards the source could still be severe, and legitimately so, but that this just tells the company (Apple) that they cannot get at the source through the publisher of the material. In other words, it is not really saying it is OK to steal information and give it to others, but it is saying that whoever publishes material is not obliged to tell anyone where they got it. Is that right?
Put that way, it does sound a bit like saying a fence is above prosecution while the thief is a legit target, which is not the case where physical things are concerned (in fact, the fence is often punished harder than the petty thief).
It is my understanding that the court ruling does not compel the blogs/websites to reveal the name of the leaker. It protects the news agency, not the source.
If Apple were to find out the name of the leaker, and went after that party then yes Apple would probably win. I would bet every that Apple employee and company officer has signed a non-disclosure agreement.
This is interesting Constitutional law because the 1st Amendment isn't too specific on what "Freedom of Speech" means. Here is the text:
"Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances."
Recently the names, dates of birth, and Social Security Numbers of every military veteran since 1975 was stolen about 28.5 million vets, I am among that group. Would it be okay to publish that information even if you were not the thief? After all there is such a thing as freedom of speech and the Veterans Administration should have kept the files secret. No of course not because all of us on that list could be negatively affected in the way of credit fraud and so on. Industrial espionage can negatively affect the employees if a competitor would use it bring out a clone of the product before the developer could benefit. By they way, my credit is already on watch because personal info was stolen from my bank a few years ago in a similar off-site theft in a contractor's home.
I am still mixed about the ruling. I believe in a strong press and other freedoms granted under our Constitution, but the Bill or Rights is not carte blanche to step on other people.
Not in favor of tyrants, but your argument basically just invalidates all intellectual property law as well and means any idea can be stolen, sold, given away and there is absolutely NO recourse if it is published in any manner.
Ownership of ideas just became a moot point. All your knowledge belongs to me!!!!!!!!!!!!!!!!!
Sat May 27, 2006 12:55 pm Subject: So, Where's Asteroid?
Is the product in question locked down because of the case? I for one would LOVE an Apple-branded firewire breakout box to tame the analog audio space. (Please don't post back with suggestions, I have eMagic products already). Something in the Mini form-factor would be ideal, with internal 3.5" storage.
While I'm wishing, where's the bluetooth Mighty Mouse?
If Apple were to release Asteroid, it would no longer be a trade secret, but legal action concerns the violation *at the time of the offense*. So releasing it shouldn't affect the case. Or was the product so bad that it was killed off internally? Or were the rumors false? Bait for flushing out the culprits?
As far as disgruntled employees are concerned, all the more reason to keep them gruntled in the first place. I'll bet the leakers ultimately made Apple a better company, either by improving treatment of workers, or strengthening information security.
Sat May 27, 2006 2:05 pm Subject:
When a car company tests a vehicle on a test track, it is visible to the world (although not necessarily easily). A person outside the track can legally use a telephoto lens to take the pictures and there can be no recourse.
This case is different because the information that was published was not openly available to the public. It had to be acquired by an employee within the company, in violation of their NDA. Essentially it was stolen from the company. Publishing that information would be similar to fencing stolen goods. At least, that is Apple's position. And probably the same position would be held by any other corporation that creates products. Release of that information can (and often does) create financial harm to the company because it allows their competitors insight into their plans and products, potentially giving them an opportunity to create a similar product to compete.
I would feel the same way about information stolen from Microsoft or any other company. Theft of information is crime that has a tangible effect on the company's bottom line and should be prosecuted.
QuoteGuest wrote:
With all of the comments about disgruntled employees and such, it should be noted that what was ruled here was a protection of the journalists who published the information, not the people who leaked the source. If you have such a beef with the fact that someone leaked information (like that's never happened before), you would do well to remember that journalists, whether you respect them as a traditional news source or not, are free to print the news. Not to mention that in many cases, leaks need to be printed. Or is everyone here too young to remember Watergate?
I am old enough to remember the Watergate burglary and the aftermath when it was current events. Watergate was about malfeasance, this current case is about publishing trade secrets.
Well the court has ruled and the ball is now in Apple's court (pun intended) to take it further or not.
Sat May 27, 2006 8:19 pm Subject: re: Apple Handed Major Defeat as Appeals Court Sides with EF
Sun May 28, 2006 3:58 pm Subject: Re: This is good news, not bad news
QuoteAnonymous wrote:
If you don't think journalists need such special protections, you need to catch up on your reading.
Apple just needs to slip a message to the NSA that the guy is a possible terrorist. No stupid judge with his fancy laws and concerns for people's rights will hinder them.
