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Apple claims 'huge' loss over iPhone leak

Company knew who sold prototype to Gizmodo same day story broke

May 17, 2010 06:03 AM ET

Computerworld - Apple officials told police investigators that the publication of photos of an iPhone prototype was "immensely damaging" to the company and represented a "huge" loss, recently released court documents show.

Those documents, released Friday by a San Mateo, Calif., county judge, reveal details of a meeting between police and Apple officials that ultimately led to the seizure of several computers from the home of Gizmodo editor Jason Chen.

Gizmodo published photographs and analysis of the iPhone prototype -- widely believed to be similar to the smartphone Apple will launch next month -- on April 19. Gawker Media, the company that operates Gizmodo, has admitted it paid $5,000 for the phone after it was left at a Redwood City, Calif., bar by an Apple software engineer.

The next day, April 20, Detective Matthew Brand of the San Mateo County Sheriff's Office met with Bruce Sewell, Apple's chief counsel, Rick Orloff, the company's director of information security, and George Riley, a lawyer from the Los Angeles law firm of O'Melveny and Myers, which represents Apple. During the meeting, Riley told Brand that the premature disclosure of iPhone details had been "immensely damaging" to Apple.

"By publishing details about the phone and its features, sales of current Apple products are hurt wherein people that [sic] would have otherwise purchased a currently existing Apple product would wait for the next item to be released, thereby hurting overall sales and negatively effecting [sic] Apple's earnings," Riley said, according to the affidavit Brand swore out for a search warrant of Chen's residence.

When Brand asked Riley to put a dollar amount on the loss, Riley said he could not estimate it, but believed it was "huge."

The affidavit also revealed that Apple knew the identify of the man who sold the prototype iPhone to Gizmodo on the same day that the blog published its story.

By Brand's affidavit, Katherine Martinson, who identified herself as a roommate of Brian Hogan, said Hogan had been in possession of the iPhone and had sold it to Gizmodo. Martinson had provided Orloff a photograph of a sticker bearing identifying markings that had been attached to the iPhone. Orloff told Brand that the markings matched those of the missing iPhone.

On April 29, Hogan, a 21-year-old college student from Redwood City, was named by his attorney as the person who took the iPhone from the bar and sold it to Gizmodo. Hogan has not been arrested or charged with a crime.

According to Brand's affidavit, Martinson told Apple of Hogan's involvement because she was afraid she would be dragged into any criminal charges. "Orloff said that Witness Martinson contacted him due to the fact that Suspect Hogan connected the stolen iPhone to her computer and she believed that Apple would eventually trace the iPhone back to her IP address," the document stated.

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