Sorry to tell you, but Think Secret was wrong
I know I’m going against popular sentiment here – almost everything I’ve read in the past two days has berated Apple over its settlement with Nick Ciarelli of the rumor site Think Secret. But it’s very clear that what Ciarelli did was wrong, and that Apple was well within its rights to go after him.
For those who somehow missed it, here’s the news: In December of 2004, two weeks before Macworld, Ciarelli published information on his Think Secret Web site about the forthcoming $499 Mac Mini and iLife ’05 software – information obtained from at least one Apple employee who had signed a non-disclosure agreement. Ciarelli was spot on, and Apple was irked.
So Apple sued Think Secret to get the names of the employees who had blabbed to Ciarelli in violation of their NDA. Ciarelli, with the help of the Electronic Frontier Foundation, countered with a First Amendment defense, even filing a motion under California law intended to prevent baseless lawsuits that inhibit free speech.
Yesterday’s settlement was the first development in the case in over two years. Ciarelli agreed to shut down Think Secret and Apple agreed to give up on getting the names of its rogue employees. While the details of the settlement are confidential, most observers believe Ciarelli received a substantial cash payment from Apple to end the litigation.
Virtually every Mac Web site, and quite a few mainstream news sites, have interpreted the settlement as “bad for journalism” and evidence “Apple is a bully” that answers Web critics with lawsuits.
Such knee-jerk reactions fail to take into consideration the facts of the case, and the laws that apply to it.
The Apple employees who passed on the information -- considered trade secrets -- broke the law. The NDA they signed is a legally binding agreement. Apple’s unannounced products fit the definition of a trade secret: “a process, method, plan, formula or other information unique to a manufacturer, which gives it an advantage over competitors.”
One can violate the federal trade secret law in several ways. Transmitting the information, as the Apple employees did, is one way. Receiving information “knowing the same to have been stolen or appropriated, obtained, or converted without authorization” is another. That’s what Ciarelli did. He even solicited such information with a “Got dirt?” message and phone number on the Think Secret site, a second violation. Even an attempt to commit one of the offenses breaks the law.
Over at the All Things Digital site, John Paczkowski compares what Ciarelli did to what Piper Jaffray’s Gene Munster and other analysts do when they survey Apple’s suppliers to ascertain what the company is working on. He suggests Apple doesn’t sue them or media like the New York Times because they’re large, powerful organizations. Wrong. Apple doesn’t sue them because they don’t break the law in obtaining their information. It’s unlikely any major newspaper would publish information in violation of a federal law unless that information was vital to the public interest.
Furthermore, Apple can’t sue people just for criticizing the company. In this blog I have frequently criticized Apple and never have received so much as an e-mail of complaint. The First Amendment protects commentary on public companies and public figures (like Steve Jobs). It’s not designed to protect people who publish information that violates other laws.
It’s easy to paint Apple as a bully in this scenario. Ciarelli, 13 when he launched Think Secret, was still a teenager when Apple (now a senior at Harvard), the multi-billion dollar corporation, sued him. Many have hailed Ciarelli as a talented journalist who dug up info no one else had while heroically protecting his confidential sources.
As a journalist myself for more than 20 years, I view Ciarelli with ambivalence. Yes, he got the goods, but he obtained it illegally. Even journalists need to obey the law. News of the new Mac Mini was not worth violating the law.
Ciarelli did protect his sources, and I commend him for that. Those people would have lost their jobs at Apple immediately had he exposed them. But then, Ciarelli’s actions put them in jeopardy in the first place.
Many also have questioned why Apple would seek to punish an Apple-boosting Web site like Think Secret, which they say benefited Apple by fostering interest in the company and its products. True, but beside the point.
Apple’s intent was not so much to intimidate a scrappy young journalist who stepped over the line but to protect the secrecy of its products. Not only does hiding its unannounced innovations from competitors until the last possible moment serve Apple’s business interests, but secrecy is also a key to its marketing strategy.
How much media coverage does Dell or Hewlett Packard get when they announce a new model of PC? Does anyone even notice? Consumer electronics companies bring out new products all the time, many of them quite good, but no one gets the avalanche of media attention Apple does.
Much of that has to do with the element of surprise. Apple publishes no product “road maps” as do other tech companies, and employees are legally bound with NDAs to keep quiet. When Steve Jobs announces a stunning new product, it’s a surprise to everybody – and consequently news.
If Apple allowed its employees to yak to the Mac rumor sites unchecked, there would be no Macworld surprises (or any surprises, ever). Apple would lose some of that fawning free publicity and a chunk of its mystique as well.
I realize everyone feels sorry for Ciarelli and the loss of Think Secret. Hey, I enjoy reading Apple rumors as much as the next guy. But let’s keep it in perspective. This settlement threatens no one on the Mac Web who follows the rules.
Ciarelli is lucky Apple elected to settle (probably to avoid the bad publicity of a full-blown trial). He could have ended up leaving Harvard not for a “promising career in journalism,” but for an extended stay at a federal prison.
Comments
It's more complicated. Big media does use whistleblowers all the time. But big media rarely throws the gauntlet down so directly and continuously.
Apple should have found another way to discover the loose lips.
Posted by: Alec | December 21, 2007 6:55 PM
Nice article.
I'm pretty surprised at the vehemence directed at Apple by otherwise legitimate sources, like Salon, Matthew Ingram, etc. when its obvious they don't know all the facts of the case nor of the settlement. They all decided based on the PRspeak released by both companies that Apple "closed down" his site. We don't know what happened, period. But bashing Apple is good for clicks, I'm sure.
Posted by: Macbooker | December 21, 2007 10:09 PM
Good perspective. Actually, I think Ciarelli was ready to move on, and was more than willing to end ThinkSecret. The site has been pretty poor the last couple of years.
Posted by: mark | December 22, 2007 2:24 AM
Excellent article. I agree 100%. This entire issue has to do with NDA. Thank you for explaning the real issue and defending the law. I can't understand how many grown men have blasted Apple because they put their emotions ahead of their brains. And this is a no-brainer. And for what? That we were getting a Mac Mini? Give me a break. I enjoy the excitement of NOT knowing what is coming down from Apple. It builds excitement and makes Apple what they are. It's their culture.
I am so disappointed where the Internet is heading. It is no more than emotional people who want to blab about things with no effort to research what they write about. And then we all sit around and say how great it is. It isn't. Not knowing the truth about what you write about spreads false information and turns readers into a raving mob like those out to destroy Frankenstein. Even the headlines from most of the bloggers was not true, but they want people to read what they have to say.
Thanks for telling it like it is.
Posted by: Chuck | December 22, 2007 8:39 AM
Excellent analysis. Finally, someone explains how this guy violated trade secret law. How unfortunate that "journalists" often think their holy crusade trumps all laws. I think you let the employees off too easily, though. Ciarelli didn't put them in peril, they put themselves in peril by breaking an NDA, and as an AAPL stockhoIder, hope they were discovered and fired for it. Too bad everyone is feeling instead of thinking on this one. Learn trade secret law and it's pretty clear cut.
Posted by: AAPL stockholder | December 22, 2007 1:02 PM
Alec (comment-1) misses it. This wasn't a whistler blower case. From what I've read, the whistle blower protections usually only apply to govt. sources and the information has to be in the public interest to be protected. This is private trade secrets, not nearly the same.
Posted by: PXLated | December 22, 2007 2:10 PM
I agree with the author of this piece. Think Secret, as much as I liked to read their stuff, was wrong here. Publishing the stuff the site owner published was wrong. It was secret and and non disclosure agreements were violated (so it seems) and Think Secret knew this and went ahead anyway. It was a risk that blew up in their face. Learn from it and quit making Apple look like the bad guys. If Apple were YOUR company and websites like Think Secret were publishing YOUR secrets, you'd be pissed off too and YOU would do whatever YOU had to do to protect YOURSELF. Don't deny it.
Posted by: JJIrons | December 22, 2007 2:48 PM
this definition of "trade secrets" is much, much too broad. it was originally meant to protect unique info that a business depended on to function. it has been expanded by corporate political power to now try to make darn near everything a secret (just like the government trying to make almost anything a state "secret" now too). this new age of secrecy is not in the public interest. in fact, it is very dangerous to our society.
a two-week jump on Mac product releases is utterly petty information, intrinsically unworthy of any "secret" status. for comparison, disclosing details of a planned patent application would be different - that could really do harm to a company and is a legitimate trade secret.
Apple's style of rigid secrecy (except whatever Jobs wants to hype/tease about) is its own business, but that doesn't make it a moral imperative. suing a citizen to get at your own employees simply because you don't want even the pettiest info leaked is an abuse of corporate power.
and more and more these days we see "non disclosure agreements" being used by business and government to in fact take away fundamental free speech rights and hide important information from public view, with lawsuits like Apple's as the enforcement threat.
this Nation is in real trouble.
Posted by: John E | December 22, 2007 3:02 PM
"Think Secret?" - Apple Finally Gets It!
I was trying not to comment on the whole "Apple Drives ThinkSecret Blog Into Oblivion" thing, but I'm tired of reading all of the, "I wonder what Fake Steve Ballmer says 'bout 'dat" post everywhere.
The reason I resisted commenting on it is because I hate praising that iTard Jobs and his wannabe computer/OS company! However, when I look at the whole ThinkSecret thing, I can't help but heap praise on them! Apple is finally behaving like a mature, professional, responsible to shareholders company!
DRIVE YOUR DETRACTORS INTO THE OCEAN!
I was impressed, I was surprised .... THIS is Apple?
Kudos Steve, you finally reminded me of .... well, me!
http://fakesteveballmer.blogspot.com
Posted by: steve ballmer | December 22, 2007 11:58 PM
Think Secret cashed in. Apple was losing this case so to save face they gave Think Secret couple of million to go away. If Apple lost the case not only would give employees who like to spill the beans a little more comfort but would call into question the legality of the non-disclosure agreement. If the NDA was called into question, then that would have caused a huge mess not only for Apple but for other companies as well.
Mr. Steve's ego was the caused of this problem because he simply had a temper tantrum that someone upstage him so he let the dogs out. aka lawyers. So in the end the company had to cash out some money for McSteve mistake.
So McSteve when something like this happens again just pay them off thats what the mafia does.
Steve have a Big Mac.
Posted by: McSteve | December 23, 2007 8:19 AM
I have to respectfully disagree with the reader who claims Apple has interpreted trade secrets too broadly. Innovation is one of Apple's key assets. When they finally expose their products, their competitors finally know what to do, but it's still up to them to figure out how to do it. Just like the slogans says: "Redmond, start your copiers!" So Apple has a very real and legitimate interest in preventing their competitors from knowing the road map until the last possible minute. And I as an investor expect them to be fully zealous in protecting this interest. In other words, Apple would be betraying its fiduciary responsibility to its shareholders if it failed to aggressively pursue Think Secret.
So now that the dust has settled, I'm pleased that Apple has done right by its shareholders, and it's also enhanced Mr. Ciarelli's Harvard education by presumably enlightening him a bit about the real world.
Posted by: Chris Jones | December 24, 2007 12:30 AM
Sounds like David Zeiler has a case of Ciarelli envy.
David's last paragraph "He could have ended up leaving Harvard not for a “promising career in journalism,” but for an extended stay at a federal prison." is a joke. I didn't know you could go to Federal Prison from a lawsuit. Apple was suing him not prosecuting him. Also ""Ciarelli is lucky Apple elected to settle (probably to avoid the bad publicity of a full-blown trial)." was also good for a chuckle - Apple decided to avoid the expense of a lawsuit by buying him out? The "nuisance settlement" is a myth. Companies only settle when they know they are going to lose.
Posted by: Shawn White | December 24, 2007 4:41 PM
Totally agree with the author.
'Journalism' 'schools' must be turning out real dunderheads these days.
Fat-as-a-boil, self-promoting bloggers, 'free-speech' creeps, and autodidacts tone-deaf to either the inner voice of fairness, or a sense of shame, are even worse.
These 'journalists' mistakenly believe that there is no justification for keeping any information private --unless, of course, it pertains to them...
Expose one of their secrets, and they opine like stuck pigs -- hyperventilating and spewing hyperbole about privacy.
Suddenly, the first amendment doesn't seem to matter anymore.
Posted by: jim | December 24, 2007 5:56 PM
The Trade Secret law is meant to protect methods, processes, techniques, and procedures from competitors that may use these areas of knowledge to produce products or services that would be used by competitors against the company that developed them.
The pre-announcement of a soon-to-be-released product or service is NOT a component of a company's ongoing business operations, nor is it necessary to be kept from the public in order for this company to be able to continue to do business or keep its competitive edge.
Apple is simply trying to have a non-disclosure agreement cover something that the Trade Secret law does NOT.
Apple settled because it knew that pre-announcing a product that is about to be imminently introduced would NOT have given competitors any knowledge of Apple's secret processes, procedures, techniques, or procedures.
Posted by: Oh Blah Dee Blah Dah | December 28, 2007 2:55 PM