Apple 2.0

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Apple lawsuit shutters rumor website

December 20, 2007: 7:47 AM ET

picture-37.jpgNearly three years after Apple (AAPL) sued Think Secret -- a rumor-gathering blog launched by a teenager that had become a thorn in Steve Jobs' side -- the site has ceased publication as part of a settlement with the company.

The news was announced in a Think Secret press release issued Wednesday:

Apple and Think Secret have settled their lawsuit, reaching an agreement that results in a positive solution for both sides. As part of the confidential settlement, no sources were revealed and Think Secret will no longer be published. Nick Ciarelli, Think Secret's publisher, said "I'm pleased to have reached this amicable settlement, and will now be able to move forward with my college studies and broader journalistic pursuits." (link)

The case drew national attention because it raised important questions about press freedom, trade secrets and how First Amendment protections extend to blogs. It was triggered by a pair of Think Secret items that described the $499 Mac Mini and the iLife '05 software suite -- two weeks before Jobs was to unveil them at Macworld.

Both posts have been removed from Think Secret's site, but at least one of them is still available on the Internet Archive here. It began:

EXCLUSIVE: Apple to drop sub-$500 Mac bomb at Expo

December 28, 2004 - With iPod-savvy Windows users clearly in its sights, Apple is expected to announce a bare bones, G4-based iMac without a display at Macworld Expo on January 11 that will retail for $499, highly reliable sources have confirmed to Think Secret.

Apple sued the site a week later, charging that it had illegally solicited Apple employees to violate confidentiality agreements. "Defendants' knowing misappropriation and disclosure of Apple's trade secrets constitutes a violation of California law and has caused irreparable harm to Apple," the suit alleged.

picture-38.jpgWhat the suit didn't mention was that "Nick dePlume," Think Secret's editor, was an undergraduate at Harvard. In fact, Nicholas Ciarelli was 13 when he launched the website from his parents' home in upstate New York and did much of his best reporting on Apple while he was still in high school.

The specter of Steve Jobs, a billionaire computer executive, seeking damages from a teenage Apple fan for stealing the thunder from a Macworld keynote address caught the eye of the national press, including the New York Times and the Washington Post. The Electronic Frontier Foundation helped arrange legal representation and Ciarelli was soon firing back at the company. As Think Secret reported:

"Apple's lawsuit is a affront to the First Amendment, and an attempt to use Apple's economic power to intimidate small journalists," [it] wrote in court filings seeking dismissal of the suit. "If a publication such as the New York Times had published such information, it would be called good journalism; Apple never would have considered a lawsuit." (link)

picture-36.jpgApple's lawyers complained in particular about a box on Think Secret's front page headlined "Got Dirt?" that invited Apple insiders to submit anonymous tips. They claimed the solicitation was a violation of The Uniform Trade Secrets Act, adopted in one form or another by California and 44 other states.

Such statutes forbid you from acquiring or publishing without authorization information you know or have a reasonable basis to know is a trade secret. They are usually invoked when the secret that is revealed gives a competitor an advantage. In this case the primary effect was to spoil the surprise of a piece of classic Steve Jobs event marketing.

The First Amendment is often cited in defense of trade secret violations, but it hasn't always fared well in the courts.

Apple will sometimes give the press a preview of major product announcements, but it is usually done under nondisclosure agreements and only with handpicked outlets with a national reach. A few weeks before it released the iPhone, for example, it issued review units to the New York Times, the Wall Street Journal, Newsweek, and USA Today.

It's unlikely that Apple was able to collect much in the way of damages from Think Secret -- which didn't have a lot of assets to begin with. Nor did the company succeed in prying the names of the blog's sources out of Ciarelli. But the suit sent a warning shot across the bow of dozens of similar rumor sites -- and it did manage to shut down one of the originals.

Ciarelli, who became an editor at the Harvard Crimson and is scheduled to graduate this spring, may be forgiven if he wants to move on with his life. Cult of Mac has already offered him a job contributing to Wired News, but he probably has bigger things in mind.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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