Lost iPhone prototype spurs police probe

Law enforcement in Silicon Valley has been contacted by Apple and is investigating the prototype iPhone 4G reportedly lost in a bar last month by an engineer, CNET has learned.

Greg Sandoval Former Staff writer
Greg Sandoval covers media and digital entertainment for CNET News. Based in New York, Sandoval is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at @sandoCNET.
Declan McCullagh Former Senior Writer
Declan McCullagh is the chief political correspondent for CNET. You can e-mail him or follow him on Twitter as declanm. Declan previously was a reporter for Time and the Washington bureau chief for Wired and wrote the Taking Liberties section and Other People's Money column for CBS News' Web site.
Greg Sandoval
Declan McCullagh
3 min read

Editor's note: Click here for a more current story on the lost iPhone prototype investigation.

Silicon Valley police are investigating what appears to be a lost Apple iPhone prototype purchased by a gadget blog, a transaction that may have violated criminal laws, a law enforcement official told CNET on Friday.

Apple has spoken to local police about the incident and the investigation is believed to be headed by a computer crime task force led by the Santa Clara County district attorney's office, the source said. Apple's Cupertino headquarters is in Santa Clara County, about 40 miles south of San Francisco.

Apple logo

Editors at Gizmodo, part of Gawker Media's blog network, said in an article posted Monday that they paid $5,000 for what they believed to be a prototype of an impending iPhone 4G. The story said the phone was accidentally left at a bar in Redwood City, Calif., last month by an Apple software engineer and found by someone who contacted Gizmodo, which had previously indicated it was willing to pay significant sums for unreleased Apple products.

The purpose of an investigation is to determine whether sufficient evidence exists to file criminal charges. Spokesmen for Santa Clara County and San Mateo County--home to the Redwood City bar--declined to comment. Representatives for Apple and Gawker Media did not immediately respond to interview requests.

CNET has not been able to confirm whether the investigation is targeting Gizmodo, its source who reportedly found the iPhone in a bar, or both. Apple acknowledged that the lost device is their property and asked for its return; Gizmodo has since said that it has returned the device.

Late Friday, Bloomberg reported that it spoke to Gaby Darbyshire, Gawker's chief operating officer, and she said that law enforcement officials had not spoken with anyone at the company. The wire service also reported that a San Mateo County prosecutor would not confirm an investigation but said that, "if there is a case that is investigated and able to be submitted for prosecution, it will be handled by this office."

The tale of a lost iPhone may sound trivial, but Apple goes to great lengths to protect the secrecy of its products, and the company has not been afraid to take aggressive legal measures in the past. It filed a lawsuit against a Mac enthusiast Web site, for instance, to unearth information about a leak. A state appeals court ruled in favor of the Web sites.

Apple argued in that case that information published about unreleased products causes it significant harm. "If these trade secrets are revealed, competitors can anticipate and counter Apple's business strategy, and Apple loses control over the timing and publicity for its product launches," Apple wrote in a brief.

Under a California law dating back to 1872, any person who finds lost property and knows who the owner is likely to be but "appropriates such property to his own use" is guilty of theft. If the value of the property exceeds $400, more serious charges of grand theft can be filed. In addition, a second state law says that any person who knowingly receives property that has been obtained illegally can be imprisoned for up to one year.

Any prosecution would be complicated because of the First Amendment's guarantee of freedom of the press: the U.S. Supreme Court ruled in 2001 that confidential information leaked to a news organization could be legally broadcast, although that case did not deal with physical property and the radio station did not pay its source.

The computer crime task force is called REACT, which stands for Rapid Enforcement Allied Computer Team, and was established in 1997 with a goal of working closely with Bay Area technology companies. In the past, for instance, Apple has contacted REACT to report an employee who sold over $100,000 worth of computers on eBay. REACT also has investigated denial-of-service attacks targeting local firms.

Updated at 7:48 p.m. PDT Friday: To include statements from Gawker Media.

Greg Sandoval, who writes about digital media for CNET, can be reached at Greg.Sandoval@cbs.com. Declan McCullagh writes about the intersection between law and technology for CNET and can be reached at Declan.McCullagh@cbs.com.