• The Unintended Consequences of Apple’s Lawsuits

    January 8th, 2005

    How does a company stop leaks about trade secrets? Well, if you’re Apple Computer, you sue the folks who allegedly spilled the beans. At the same time, however, you are forced to confirm them, simply because the court documents must contain something about the nature of the secrets that were disclosed.

    In the end, of course, that amounts to an admission, more or less, that a cheap Mac, an update to AppleWorks, possibly called iWorks, and a FireWire interface for GarageBand, are forthcoming. That doesn’t mean, of course, that you will see them at next week’s Macworld Expo, but Apple apparently urgency in filing the lawsuits appears to be aimed at stopping further leaks before things get out of hand. Or maybe not.

    Now don’t get me wrong. I think Apple has a perfect right to protect its trade secrets, and if someone breaks a nondisclosure agreement, they risk legal repercussions of this sort. While everyone enjoys reading the online gossip about new Macs and so forth, if the sites that deliver that information encourage people to break legal contracts, I can see where Apple might be upset.

    On the positive side of the ledger, rumors help fuel interest in those products. And they might even serve as sounding boards, to gauge reaction to one alleged feature or another. In the past, I’ve felt that Apple sometimes spreads information as trial balloons. If the product plans get thumbs up, well then there’s a good incentive to build it.

    But there are negatives as well. If customers believe something better is coming along real soon, whether true or not, it could hurt sales of the existing models. Keeping new model information secret is also important for marketing reasons, since the manufacturer can introduce the product on its own terms, in a way that creates the maximum amount of good press.

    In the past, when Apple was just a niche or boutique player in the PC market, maybe a few leaks here and there didn’t matter. It kept Mac users interested, and helped fuel sales. But the situation is far different now, thanks to the iPod. If Apple keeps its head and produces the right stuff at the right time, it’s poised to really gain converts from the Windows market. Of course, the rampant problems with Windows are helping considerably.

    But there is another issue at stake here, and that’s freedom of the press. How far should a news source be allowed to go before it faces possible legal problems. In filing a lawsuit against the publisher of ThinkSecret, for example, Apple’s statement makes it clear why: “We believe that Think Secret solicited information about unreleased Apple products from these individuals, who violated their confidentiality agreements with Apple by providing details that were later posted on the Internet.”

    It’s not that breaking confidentiality agreements is always wrong. What about the corporate whistle blower who reveals information about a defective product, information that could impact our health and welfare? Do you recall the Michael Mann movie, The Insider? It was based on the real life experiences of Jeffrey Wigand, a former tobacco executive, who fed CBS News information that the industry was fully aware of the harmful effects of smoking, but chose to make cigarettes even more addictive than they were already.

    In that situation, Wigand was acting for the greater good. Sure, he violated a confidentiality agreement, but, in the end, I feel he was justified in doing so to protect the public interest.

    However, nothing of the kind is involved in Apple’s trade secrets. While your curiosity may be left unsatisfied if you didn’t know about those cool products in advance, you won’t suffer otherwise. I wonder about the timing of this legal action, of course. Surely Apple’s lawyers knew the impact, that coverage quickly spread to the mainstream press and even focused more attention on next week’s announcements from Mr. Jobs.

    But now that we have a glimmer of the truth, has it taken the fun out of it? I don’t think so. It merely makes me more anxious to find out how things will turn out. Perhaps that was Apple’s intention all along, since it could just as easily waited till after the Expo to initiate those legal actions.

    And that’s my take, at least for today, on topic number one.

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