Thanks to an article in the legal newspaper The Recorder forwarded by a colleague, we’ve learned that graphics powerhouse Adobe has filed suit against the Macintosh News Network (MacNN) based on MacNN’s AppleInsider Web site’s 30-May-00 publication of details from a confidential document about the forthcoming versions of Photoshop 6.0 and ImageReady 3.0. Adobe is trying to prevent MacNN from disclosing Adobe’s trade secrets – which Adobe considers to be both the existence of those versions and their specific features – and is also seeking damages based on reduced current sales and lost competitive advantage.
It’s an unusual situation. Although the rumor sites frequently post potentially damaging confidential information that has been leaked, conflicts seldom escalate past requests to remove the offending information or legal threats. In this case, Adobe contacted Monish Bhatia, MacNN’s publisher, and asked that the information be removed within 20 minutes or it would file suit. Bhatia merely said he’d look into it, and Adobe filed suit the following day.
Why MacNN? Although Adobe is concentrating its efforts on MacNN, which eventually removed the offending material from its AppleInsider Web site, we were able to find information about Photoshop 6.0 also published by MacUser UK, plus shorter stories at MacPublishing Inc.’s MacWEEK.com and MacCentral, both of which referenced the MacUser story.
There’s no telling if MacNN and MacUser came upon the leaked information independently or if one copied the other; neither credits the other in their stories, although MacNN’s article was significantly longer and, according to Adobe, includes portions of the leaked document verbatim. The fact that Adobe chose to sue MacNN may also indicate a belief that the leak originated with MacNN, which, like many rumor sites, actively solicits inside information and rumors. However, it also raises the possibility that Adobe felt that it could push the MacNN around more easily than the larger MacPublishing or the UK-based MacUser, which is backed by the large publishing firm Dennis Interactive.
The View from Mountain View — From Adobe’s viewpoint, the lawsuit makes sense, since having features of a forthcoming product revealed to competitors could be problematic. Plus, details of a forthcoming product can cut into current sales as customers decide to hold off on buying until the new product is available.
According to Henry Perritt, Jr.’s "Law and the Information Superhighway" textbook, liability for trade secret misappropriation can fall both on someone who learns of a trade secret as the result of a special relationship (such as being an employee or signing an non-disclosure agreement to receive confidential information) and on a third party "who discovers the trade secret by accident or through the wrongful conduct of another and uses it with knowledge of its trade secret status." MacNN would seem to fall into this second category, but for one fact: MacNN is a publisher and is thus protected by the First Amendment.
Unfortunately for Adobe, it would seem unlikely that the company could win much, if anything, in court. In a recent case that addressed similar issues of a Web site posting confidential internal information, the actions of the publisher ended up being protected by the First Amendment, despite having misappropriated trade secrets. In Ford v. Lane, decided in September of 1999, Judge Nancy Edmunds of the U.S. District Court for the Eastern District of Michigan ruled that although Robert Lane had violated Michigan’s Uniform Trade Secrets Act in posting confidential Ford Motor Company documents on his Web site, BlueOvalNews, Ford’s request that Lane be forced by injunction to remove Ford’s documents from his Web site would "constitute an invalid prior restraint of free speech in violation of the First Amendment."
Moreover, it’s not clear what Adobe hopes to accomplish with this lawsuit. Adobe claims in the Recorder article that damages "could conservatively amount to tens of millions of dollars," but there’s no way that MacNN has that kind of money. And even if Adobe manages to put the fear of litigation into the gonzo rumor sites, reporters for publications with large legal staffs certainly won’t shrink from publishing leaked documents if it means a news scoop. We’ve even heard rumblings from journalists threatening not to review Adobe software in the future, and no matter what, by suing a member of the press, Adobe may have poisoned the well with many writers.
The ruling in Ford v. Lane was not entirely a victory for Lane and BlueOvalNews. Judge Edmunds upheld two other portions of the temporary restraining order that Ford was attempting to have turned into a preliminary injunction. First, "Lane is still obligated to comply with that part of the August 25, 1999 Temporary Restraining Order which required him to file with the Court, and serve upon Ford, within ten days, a sworn statement (1) identifying with particularity all documents within his possession, custody or control which were originated by or for Ford, (2) identifying the source (by name or description) of each document, and (3) providing details as to how Lane acquired each document." And second, "Lane is restrained from (1) committing any acts of infringement of Ford’s copyrights, including unpublished works known by Lane to have been prepared by a Ford employee within the scope of his or her employment, or specially ordered or commissioned by Ford, if not an employee."
Think about those requirements for a moment. They say that:
A) Lane must identify all the Ford documents in his possession, identify the source of each document, and provide details as to how he acquired each document. Lane claimed that he received the documents from anonymous sources.
B) Lane cannot infringe upon Ford’s copyrights, including unpublished documents.
Item A gives Ford as much information as is available about the source of the document leaks. If I had passed confidential information on to Lane, even anonymously, I would still be worried. Item B says, at least to me, that Lane can no longer post Ford’s confidential information verbatim without being liable for copyright infringement.
Now turn back to the Adobe v. MacNN case. As noted previously, it seems unlikely that Adobe can overturn federal First Amendment protections with an appeal to the California laws regarding trade secrets. (Trade secrets protections generally fall under the purview of the states, not the federal government.) However, it would seem possible that MacNN could be required to disclose information about how it came by the Adobe documents, which could help Adobe identify the source of the leaked document. Adobe, like many other companies, considers revealing confidential information a firing offense, so it’s possible that Adobe is looking to make an example of someone. Plus, although the Recorder article didn’t talk about Adobe suing on copyright infringement grounds, the fact that Adobe claimed that MacNN reproduced some of the text verbatim could be relevant. MacNN’s article neither differentiated between original and copied content nor referenced the Adobe document directly. Adobe’s lawyers might be able to make a case for MacNN’s copying not falling into the fair use exception to copyright.
The Point of Publishing — I find myself of several minds in this case. With the Ford v. Lane decision appearing quite similar to the untrained eye, Adobe v. MacNN would seem to be a clear-cut case of First Amendment protection. As a publisher, I hold the First Amendment in the highest regard.
And yet, I’m disturbed by MacNN’s decision to publish this information, however they came by it. Certainly Adobe believes publication of the Photoshop 6.0 and ImageReady 3.0 features is damaging, although in the case of a market leader like Photoshop, it’s difficult to swallow Adobe’s claims of "tens of millions of dollars" in damages. But who was MacNN serving by publishing the information? The standard argument for publishing rumored information in this kind of situation is that it helps users make more informed buying or upgrade decisions. Perhaps I’m not sufficiently steeped in the graphics world, but I can’t see how leaking these details directly benefits most users.
In the hardware world, this argument is easier to make, since there’s little worse than the feeling of buying a new Mac a week before Apple comes out with an improved and cheaper model. With software, particularly with a program that has as little serious competition as Photoshop, it’s harder to justify needing to know about forthcoming features. Discounted or even free upgrades are almost always available for these programs if you’ve purchased a previous version, especially right before the release, and it’s unlikely that anyone would put off a purchase of the current version of Photoshop or buy another product based on the kind of information MacNN published.
So if users reap no benefit and Adobe stands to suffer, publishing this information merely has the effect of helping MacNN make a buck off the ads placed on the five Web pages of the story. Nothing wrong with that, but I still find it depressing that a Macintosh publication would publish information that – for little tangible benefit to readers – could have a negative effect on the Mac community by damaging one of the industry’s primary software developers.
If you’re not sure that this lawsuit is a big deal, consider where the entire Mac industry might be if the release of the iMac had been leaked. What was a huge surprise announcement that catapulted Apple back into the center of attention could have been yet another product announcement that everyone already knew about. The iMac release was primarily about marketing, and Apple couldn’t afford to have its big news diluted by a leak. Since then, Apple has commented in analyst calls reported on by MWJ’s Matt Deatherage that rumors of constantly impending PowerBooks caused significant drops in then-current sales. A majority of those rumors – promulgated by highly visible rumor sites – turned out to be false, but they meant that Apple was left sitting on inventory as everyone waited for the next PowerBook that was supposedly due any day.
Remember, in the Macintosh ecosystem a bit of altruism can go a long way.