On the Discovery Ruling in ‘Apple v. Does’

Tuesday, 15 March 2005

Last Friday’s ruling from Judge James P. Kleinberg in Apple’s lawsuit against 25 unknown “Does” (as in “John Doe”) is both readable and cogent. It also augurs poorly for Think Secret, Apple Insider, and PowerPage.

If you’re interested in these proceedings, I highly recommend you read the ruling yourself. I’ve made a 183 KB PDF version of the ruling available for download — it was produced from the Word document hosted by CNet, and so is much better than the PDF hosted by the EFF, which was apparently scanned in from a fax.

But however interesting, the most important thing to note about this ruling is that it covers just one narrow issue — whether or not Apple can subpoena Nfox, the email provider of PowerPage. For all we know at this point, Nfox doesn’t even have archived email or logs that would identify the source of the leaked information.

But while this ruling applies only to this narrow issue, the reasons why Apple won bode well for the company in the separate case of Apple v. Think Secret.

A Few Comments on Particularly Interesting Passages of the Ruling

P. 5, the legal definition of “trade secret”, from the California civil and penal code:

“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

1. Derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and
2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Apple’s executives believe the company profits by keeping its product plans secret until the company is ready to announce them. Apple’s product secrecy is largely an attempt to maximize publicity at the right time — namely, the moment when the products are available for order.

The rumor sites argue, and will continue to argue, that they provide Apple with “free publicity”. While true, such publicity is insignificant from Apple’s perspective. The type of publicity Apple seeks is, say, the cover of Time magazine — which they got for the announcement of the iMac G4 at Macworld Expo in January 2002. If the iMac G4 had leaked through the rumor sites prior to its announcement, it’s almost certain Time would not have put it on the cover. It was the exclusivity and surprise that made it cover-worthy.

Think Secret and the others are likely to argue that Apple’s unannounced product plans are not trade secrets, but I don’t think they’re going to win that argument.

On p. 6, the ruling continues:

These statutes reflect this state’s strong commitment to the protection of proprietary business information. See Integral Dev. Corp. v. Weissenbach (2002) 99 Cal. App. 4th 576, Magnecomp Corp. v. Athene Co. (1989) 209 Cal. App. 3d 526. The statutes also support the compelling interest of disclosure which may, in the proper civil case, outweigh First Amendment rights. As discussed infra, the United States and California Supreme Courts have underscored that trade secret laws apply to everyone regardless of their status, title or chosen profession. The California Legislature has not carved out any exception to these statutes for journalists, bloggers or anyone else.

For these reasons the Court has carefully reviewed the showing made by Apple to date. The posting by Mr. O’Grady contained an exact copy of a detailed drawing of “Asteroid” created by Apple. The drawing was taken from a confidential set of slides clearly labeled “Apple Need-to-Know Confidential.” In addition, technical specifications were copied verbatim from the confidential slide set and posted on the online site. These postings by Mr. O’Grady were spread over three days, November 19, 22 and 23, 2004. The Court is convinced by Apple’s presentation, including the materials produced in camera that this action has passed the thresholds necessary for discovery to proceed.

So, yes, there’s a First Amendment argument that these sites have the right to publish this information, and to keep their sources confidential — but these rights are outweighed by California’s trade secret statutes and established case law.

Rights are not absolute. Recall Justice Oliver Wendell Holmes: “The right to swing my fist ends where the other man’s nose begins.” What the court is saying here, more or less, is that the right to publish information about Apple ends where their trade secrets begin.

This is the aspect of these cases that has the potential to truly matter. There is definitely a case to be made that trade secret statutes should not outweigh First Amendment rights. Getting trade secret laws ruled unconstitutional would make for, needless to say, a landmark case.

UCLA Law School professor Eugene Volokh argues just this point — that the First Amendment protects third parties (i.e. those who have not signed confidentiality agreements, such as journalists) from trade secret liability — in his paper, “Freedom of Speech and Information Privacy: The Troubling Implications of a Right to Stop People From Speaking About You”.

On p. 7, under the section “Journalists and Privilege”, the court writes:

Much of movants’ papers and argument is a recitation of the obvious: the terms and importance of the First Amendment and the value of free speech which this Court recognizes.

This is the judge’s way of saying that the movants are making a very broad argument, and pretty much have nothing.

Pp. 8-9, on journalists’ “privilege” to keep their sources confidential:

Similarly the claim of “privilege” is overstated in this context. Reporters and their sources do not have a license to violate criminal laws such as Penal Code §499c. […] Counsel for the moving parties admitted this during argument.

Movants contend they are journalists. They make this claim because they seek the protection of the privilege against revealing their sources of information. Defining what is a “journalist” has become more complicated as the variety of media has expanded. But even if the movants are journalists, this is not the equivalent of a free pass. The journalist’s privilege is not absolute. For example, journalists cannot refuse to disclose information when it relates to a crime. As the Supreme Court in Branzburg stated:

The preference for anonymity of those confidential informants involved in actual criminal conduct is presumably a product of their desire to escape criminal prosecution, and this preference, while understandable, is hardly deserving of constitutional protection. 408 U.S. at 691.

P. 11, on the issue of whether the public interest would be served by allowing these sites the right to publish Apple’s trade secrets:

[…] Mr. O’Grady is far from alone: the public has had, and continues to have a profound interest in gossip about Apple. Therefore it is not surprising that hundreds of thousands of “hits” on a website about Apple have and will happen. But an interested public is not the same as the public interest.

At the hearing the Court specifically asked what public interest was served by publishing private, proprietary product information that was ostensibly stolen and turned over to those with no business reason for getting it. Movants’ response was to again reiterate the self-evident interest of the public in Apple, rather than justifying why citizens have a right to know the private and secret information of a business entity, be it Apple, H-P, a law firm, a newspaper, Coca-Cola, a restaurant, or anyone else. Unlike the whistleblower who discloses a health, safety, or welfare hazard affecting all, or the government employee who reveals mismanagement or worse by our public officials, the movants are doing nothing more than feeding the public’s insatiable desire for information.

In other words, and contrary to the beliefs of some DF readers, there is no inherent “right” for the public to know what Apple, or any other private enterprise, is up to behind closed doors. Just because you have a desire to know doesn’t mean you have a right to know.

Continuing from the previous paragraph:

Indeed, a careful review of movants’ opening and reply papers and the hearing transcript reveals that movants never adequately dealt with the issue of the intersection of trade secrets and journalistic privilege. Movants’ opening brief does not mention the UTSA or Penal Code § 499c. The reply brief states, “This motion does not implicate the issue of whether Apple’s trade secret was protected speech; …” Movants’ Opening Brief, at 7: 4-5. When skilled lawyers largely ignore an essential issue that the Court specifically inquires about, it sends a message they have little to say on the subject. And if, as movants argue, trade secrets are always at risk — a “sieve”, quoting Kewanee Oil v. Bicron, (1974) 416 U.S. at 489-9010 — how does one explain the explicit statutory language of the UTSA and Penal Code?

In other words, the question the court was most interested in was how the movants justified their actions with regard to California’s civil and penal trade secret laws; but the movants’ opening brief didn’t even broach the subject.

The rumor sites, the EFF, and their attorneys apparently want to argue these cases solely in terms of the First Amendment. But Apple sees this as a matter of trade secret law, and with this ruling, the court agrees with Apple.