Why Apple Should Sue Gawker Over 'Lost' iPhone Story

How hard must the finder of lost property try to return it to its owner before deciding it's his to keep or sell? The answer to that question could determine whether Monday's iPhone scoop results in millions of dollars in legal damages, or even criminal charges, for its purveyors.

Gawker Media has admitted -- boasted, really -- that it paid $5,000 to get its hands on a prototype of a fourth-generation iPhone for its gadget blog, Gizmodo. The seller of the device told the editors of Gizmodo and other technology blogs that he found it unattended in a bar called Gourmet Haus Staudt in Redwood City, California.

But shortly after Gizmodo published its blockbuster story about the phone, critics began accusing the site of breaking the law by, in effect, purchasing stolen goods.

Lost or Stolen?

Gawker Media owner Nick Denton told me Monday that his company researched the relevant case law to determine that it was in the clear before proceeding with the transaction. But after looking into the story futher, I'm far from convinced.

I think a district attorney could make a solid criminal case that Gawker Media purchased what it knew or suspected were technically stolen goods. And I think Apple's lawyers could make an even tighter civil case that, in so doing, Gawker misappropriated trade secrets, inflicting damages that could run to millions of dollars.

At heart is the question of whether the person who found the phone made "reasonable and just efforts to find the owner and to restore the property to him," as required by the California penal code. In its account of what happened, Gizmodo says the finder "asked around" the bar where he found it. And after realizing it was an Apple prototype, he called several numbers at the company.

Finders Keepers?

What he never did, however, was notify anyone who worked at the bar, according to its owner, Volcker Staudt. That would have been the simplest way to get the phone back to the Apple employee who lost it, who "called constantly trying to retrieve it" in the days afterward, recalls Volcker. "The guy was pretty hectic about it."

Nor did the finder report it to the Redwood City Police Department, says Sgt. Dan Mulholland. To be fair, no one from Apple told the police the phone was lost, either. I contacted a company spokeswoman to ask why not but never heard back.

Assuming the jury in a hypothetical criminal or civil suit consisted of locals like Volcker, the claim that the seller's actions constituted a "reasonable effort" to contact the owner wouldn't hold much water. "The most reasonable effort would have been to bring it back to us, because he knows that person would be going back to us first," says Volcker. "Why not just make it simple and bring it back?"

Buyer's Burden

And make no mistake: In this case, it was up to Gawker to establish that the seller legally possessed the property. Paul J. Wallin, a founding partner at the California law firm Wallin & Klaritch, offers an analogy. "If you purchase a Rolex watch at a swap meet for $200, a reasonable person would be put on notice that it might be stolen goods," he says. The buyer would thus be required to take extra measures to determine that it wasn't.

When I asked Denton what steps his company took to ensure that the seller had, in fact, made a good-faith effort to return the phone to Apple before shopping it around, he redirected the question. "We weren't convinced the phone was even a genuine prototype until the weekend [ie. after Gizmodo bought and dismantled it]," he said. "And we didn't discover the name of the Apple engineer who lost it until Monday. We called him and -- after Apple officials got back to us -- we returned the device to them."

Denton insists returning it to Apple was the plan all along if the phone turned out to be authentic. But Wallin doesn't believe that argument would be of much use in court. "How many times do people say after they're caught that their intention was to return something?" he says. "Can someone raise that defense? Of course. That doesn't mean it's going to be believed."


Update, 9:28 p.m.: Now that I've had a few hours to digest all this, I am somewhat scandalized, even outraged. Put simply, Gawker Media brazenly, publicly flouted the law. It subsidized a crime: the selling of stolen merchandise. Then it published a misleading, whitewashed account of the seller's actions meant to make it look as though he was not acting with criminal intent. It published this account in order to disguise its own culpability in the matter.

From my own reporting, it's clear the finder of the phone made only the most perfunctory efforts to return the phone to its owner. The gestures he made after learning the true value of the device -- calling the switchboard at a giant corporation and leaving a message, essentially -- reek of insincere behind-covering. One gets the strong impression he did the absolute bare minimum necessary in order to be able to claim later that he tried to return the device. He might as well have sent a postcard addressed to "Steve Jobs, Apple Inc., USA."

But Gizmodo presents his story as though his actions were in good faith. "What should he be expected to do...[w]alk into an Apple store and give the shiny, new device to a 20-year-old who might just end up selling it on eBay?" asks the site, as though that was the only alternative left to him -- when, in fact, as I reported above, the seller never bothered to so much as tell the owner of the bar or the police.

I learned this by making a total of three phone calls. Either Gizmodo's editors didn't bother to do even that much due diligence because they were afraid of what they would find out, or they knew the seller had made no meaningful effort to return the phone but decided to buy it anyway. Either way, they are guilty.

I understand the moral calculus they used. We all feel intuitively that picking up something that someone else left behind is not as bad as seizing it by force, stealth or deception. But in the eyes of the law, it's still stealing. And buying stolen goods is a crime. In those rare cases where a journalist commits a crime and receives the benefit of prosecutorial discretion, it's usually because he can demonstrate there was a compelling public interest at stake. There is no such interest here. The only parties who benefited from Gizmodo's story are Gawker Media and Apple's competitors.

I'm not normally one to root for manufacturers over journalists, or for Goliath over David. But what Gawker Media did here was egregious. I doubt Steve Jobs will sue, but if he does, he will have justice on his side.