Apple alleges student Web publisher misappropriated trade secrets on site

CALIFORNIA — Harvard University student Nick Ciarelli in 1998 as a way to showcase his enthusiasm for Apple products.Seven years later, he is fighting to keep the site online.

The site includesinformation and previews of Apple products, such as the iPod Mini that wasreleased in January or an operating system, Gold Master, that is slated forrelease in late April. What has ignited a lawsuit from Apple Computers Inc. andforced Ciarelli to publicly declare himself a journalist is the fact thatCiarelli, who goes by Nick dePlume on his site, gathers his information fromanonymous sources that allegedly work for Apple. The battle has forced Ciarellito publicly declare that he deserves the same protections afforded to similarpublishers of newsworthy information.

Apple filed a lawsuit against ThinkSecret in January, claiming that Ciarelli illegally posted information onApple’s intellectual property by knowingly obtaining trade secrets fromApple employees who are bound by confidentiality agreements. Apple claimsCiarelli’s site induced its employees to divulge trade secrets and wantsCiarelli to remove his site and reveal his sources.

Citing the CaliforniaTrade Secrets Act, Apple has accused Ciarelli of misappropriation, or“acquisition of a trade secret of another by a person who knows or hasreason to know that the trade secret was acquired by improper means,” suchas a breach of a duty to maintain secrecy.

Ciarelli called the lawsuit“frivolous” and “unprecedented.” In a press releasedated March 4, Ciarelli defends himself by stating that, as a journalist, hisFirst Amendment rights are being violated by the lawsuit.

“Apple’s lawsuit is an affront to the First Amendment, and anattempt to use Apple’s economic power to intimidate smalljournalists,” he said, citing Think Secret’s court filings.“If a publication such as the New York Times had published suchinformation, it would be called good journalism; Apple never would haveconsidered a lawsuit.”

Ciarelli is being represented by Terry Gross, anattorney who has worked with the Electronic Frontier Foundation, an organizationthat defends Internet civil liberties. Gross said Think Secret did not solicitinformation through improper means and called the lawsuit“meritless.”

In March, Gross filed a motion to dismiss thelawsuit, which stated in part, “A journalist cannot be held liable fortrade secret misappropriation or for inducing breach of contract for publishingnewsworthy information lawfully obtained.”

Apple would not comment,citing the pending lawsuit.

The lawsuit has ignited media attention andraised questions that as of yet have no clear answers: Under the law, are Website publishers considered journalists and therefore able to protectconfidential sources? And is the publisher or journalist protected if the solepurpose of speaking with confidential sources is to obtain trade secretinformation?

Ron Collins, a scholar for the First Amendment Center, formerlaw clerk to the Oregon Supreme Court and former professor of constitutional andcommercial law, said he believes Web site publishers should be consideredjournalists and therefore be protected from revealing sources. However, Collinssaid, courts are seldom sympathetic toward any journalists seeking to protectconfidential sources today.

Matthew Cooper, a Time magazine reporter,and Judith Miller, a New York Times reporter, both may face jail time forrefusing to disclose their sources. A three-judge panel of the U.S. Court ofAppeals for the D.C. Circuit recently ruled that no privilege protectsjournalists from being compelled to disclose their sources before a grand jury.(See story on page .)

“If a traditional, mainstream journalistcan’t [protect their sources], how is any [other journalist] supposedto?” Collins said.

However, Collins added that the exchange of tradesecrets is a “clear exception” to the FirstAmendment.

“When there’s a confidential source and a [journalist]is basically protecting the source who has wrongfully taken property, then itbecomes particularly tough,” Collins said. “If you can give [tradesecrets] to the press and the press can just call you a confidential source,then there wouldn’t be any trade secrets.”

David Hudson, aresearch attorney for the First Amendment Center and professor of legal researchas well as a former law clerk, also questioned Ciarelli’s First Amendmentclaim, citing the 2001 Supreme Court case Bartnicki v. Vopper.

Inthat case out of Pennsylvania, an unidentified person illegally intercepted andtaped a cell phone conversation between a teachers’ union chiefnegotiator, Gloria Bartnicki, and the union president over contract negotiationsbetween a local high school and school board. Following the end of thenegotiations, the intercepted tape was released to Frederick Vopper, a localradio commentator who played it on his public affairs talk show. Bartnicki suedVopper and another radio station for “repeated publishing” of theconversation, which she claimed had been illegally intercepted by an anonymoussource. Vopper argued that he was protected under the First Amendment.

Thecourt ruled in favor of Vopper, saying that “the media cannot be heldliable for publishing information of public concern that is obtained unlawfullyby a source” and “free speech interests outweighed individualprivacy concerns,” according to an article on the Reporters Committee forFreedom of the Press Web site. Two key factors in the ruling were thecourt’s finding that media members did not participate in committing theillegal activity, and that the information recorded was a public matter. In theThink Secret case, the question remains if the court will find thatCiarelli’s Web site is providing a forum that encourages Apple employeesto divulge trade secrets—which Apple argues would make Ciarelli aparticipant in illegal activity—and if trade secrets are of public orprivate interest.

In addition to its suit against Think Secret, Apple alsofiled a lawsuit against 25 unnamed persons who divulged trade secrets to otherApple enthusiast sites, including AppleInsider and PowerPage. In a March 11ruling, a judge said that there are no legal protections for sites that publisha company’s trade secrets because, he said, that information is“stolen property.” Although the ruling was preliminary, it suggeststhat one court believes Web sites such as Think Secret may have no legalprotection for confidential sources of this kind.

“What underlies thisdecision is the publishing of information that at this early stage of thelitigation fits squarely within the definition of trade secret,” JudgeJames Kleinberg wrote. “The right to keep and maintain proprietaryinformation as such is a right which the California legislature and courts havelong affirmed and which is essential to the future of technology and innovationgenerally. The Court sees no reason to abandon that right even if it were toassume movants are ‘journalists’ as they claim they are.”

Lee Levine, an attorney who was involved in the Bartnicki v. Voppercase and a scholar for the First Amendment Center, called Kleinberg’sruling wrong.

“The mere fact that Apple is alleging a violation of thelaw of trade secrets, a claim that is itself of dubious validity, should not,standing alone, deprive a journalist—student or professional, mainstreammedia or blogger—of the ability to invoke the law’s protectionsagainst the compelled disclosure of confidential sources,” Levinesaid.

Both cases are pending in the state trial courts. Ciarelli said ThinkSecret has remained focused on its mission and will continue serving its readerswith news about Apple products.

CASES: Apple Computer, Inc. v. Doe 1, 74 U.S.P.Q.2d (BNA) 1191, 33 Media L. Rep. (BNA) 1449, 2005 WL 578641 (Cal. Santa Clara County Super. Ct. Mar. 11, 2005), petition for appeal filed sub nom. O’Grady, et al.v. Apple Computer, Inc., No. H028579 (Sixth App. Dist. filed March 22, 2005).Apple Computer, Inc. v. DePlume, et al., Case No. 1-05-CV-033341 (Cal. Santa Clara County Super. Ct. filed Jan. 4., 2005).