Paranoid to the core

Apple's lost iPhone has already entered folklore, but this apparently simple case has become a touch-point for a host of other issues.  An Apple software engineer, Gray Powell, lost the phone while celebrating his 27th birthday at a Silicon Valley bar. Another bar patron found the phone, recognized it as an Apple prototype and tried to return it to the company. Apple never called him back and some weeks later he sold it to blogsite Gizmodo for $5,000. Gizmodo spent a week dissecting the device and then published its findings.

Apple complained to the police that the phone had been stolen. A police special forces team broke down the door of Gizmodo editor Jason Chen and seized his computers and servers.

The direct result of this leak is that Apple has lost a PR opportunity. The iPhone 4.0 was expected to be unveiled in early June. (Some bloggers claimed Apple contrived to lose the phone, but they obviously don't know Apple.)

Of course, this created some PR upside, too. There aren't many people on the planet who don't know that a new iPhone is coming, but you don't hear any thanks from Apple for that.

Protecting IP

The genuine issue for Apple is the exposure of its intellectual property - a loss worth potentially millions. Its competitors know what the new device is all about: a squarer design, a front-facing camera for video chat, a larger battery.  Knockoffs are no doubt already on their way to the Dongguan assembly line.

But who is to blame for that? Not the finder, surely, who called Apple customer service line to report the device. Apple's accusation of theft by definition is a false one because he made efforts to return the device. 

Indeed, thanks to Apple's secretive company culture, customer service reps had no idea an iPhone 4.0 was even being developed let alone had been lost. According to an Apple staffer quoted by Gizmodo, call center reps thought the call was a hoax.

A side issue is whether journalist US shield laws apply to blogsites. Are bloggers also journalists deserving of the protection of the law? Well, not a problem in Asia, where the laws routinely protect governments from journalists, not the other way around.
For the mobile industry the issue is Apple and its disproportional response. Gizmodo returned the phone yet the company still reported it as "stolen" to the police, who broke down Jason Chen's door.

It matters because Apple is now the mayor of mobile city. It sells the most desired handset in the world, a device that has almost single-handedly created demand for mobile data where previously there was none.

It totally dominates the world of mobile apps, where most of the future value of mobile is being created.

The App Store carries 186,000 apps - six times as many as Android - and is averaging 30.5 million downloads a day compared to Ovi's 1.5 million.

Apple alone will decide whether and when an app will be loaded to its store. It also decides which software the iPhone will support. Tough, Adobe.

Contrast Apple's behavior to Nokia after its new N8 device was leaked to a Russian blogger. Instead of calling in a SWAT team Nokia used the opportunity to release the phone. End of story.

Apple, for those who recall, is the company that puts its brand on the "Think Different" ad.

The one that went:

"Here's to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes.... They're not fond of rules and they have no respect for the status quo... About the only thing you can't do is ignore them."

No one would accuse Apple of ignoring its critics.

Or, as cable TV host Jon Stewart put it: "Microsoft was supposed to be the evil one. But you guys are busting down doors in Palo Alto while Commandant Gates is ridding the world of mosquitoes!"

Apple is making some insanely great products. But its obsession with secrecy is just insane.