New iPhone Prototype Leaked?

April 21, 2010— -- A prototype of the next generation of the iPhone -- scheduled for release this summer -- seems to have been left behind in a Northern California bar. Snapped up by patron who sold it to a tech news site, it has set off a game of corporate intrigue worthy of the Cold War.

Apple, which makes the iPhone, has built its towering technology reputation on secrecy. Last month, BusinessWeek reported that software developers testing the then-unreleased iPad had to promise to keep the device tethered to a fixed object in a room with blacked-out windows, and then send the company a photograph to prove compliance.

Secrecy is so much a part of the company's culture that a legend has grown up around what techies call Apple's "Gestapo," or 'Worldwide Loyalty Team' -- a group of moles who spy on fellow employees and report back to Apple executives.

So when the popular tech website Gizmodo was recently approached by an unidentified individual who said an Apple employee on the next barstool left the prototype on the bar, the site's editors had their doubts.

The person who claims to have found the device apparently tried to return it to the patron who left it behind, but was unsuccessful, Gizmodo editorial director Brian Lam told ABC News.

So the finder sold it to Gizmodo, Lam said. Lam said Gizmodo offered to return it to Apple. "I told them, all they have to do to get it back is claim it -- on record.''

There's the rub. To claim the phone and get it back, Apple would need to confirm that it was a true Apple prototype. To leave it in the hands of an outsider could give up highly valuable trade secrets and marketing strategies Apple would not want exposed.

And so began a delicate dance between one of the most powerful tech companies in the world and one of the most popular tech websites that cover the industry.

Gizmodo said the the iPhone prototype was working when found and then switched on in the bar, the mobile Facebook app was logged in to the account of Gray Powell, an Apple software engineer whose last post on the social networking site was reportedly "I underestimated how good German beer is."

It only gets better from there.

ABC News Examines 'Lost' Reputed iPhone Prototype

By the time Gizmodo blogger Jason Chen got the device in his hands, Apple had remotely disabled it. This level of connectivity lended credence to the authenticity of the device. Another intriguing clue was the custom made case, designed to seemingly disguise the unreleased tech treasure as an older iPhone model. The device apparently left behind in the bar is much more angular than the latest available iPhone model, and while the face of the device remains virtually unchanged, the square corners and aluminum edges are new.

The case used to house the device was the case for the older iPhone 3GS -- the perfect camouflage, techies gleefully pointed out. Brian Tong, editor for CNet says, "This may not be the final design for the next iPhone, but the fact that they built a fake case to make it look like the earlier iPhone, that says a lot."

ABC News got an opportunity to examine the reputed new prototype in Chen's Fremont, Calif., home office. It felt decidedly different from previous iPhones, more industrial and less rounded.

The phone had a camera on the back with what looked like a flash for taking pictures at night. The lens for the back camera was bigger than the lens on the existing iPhone 3GS, which seemed to infer improved optics for better photo quality.

On the top of the phone was a second microphone, possibly for noise cancellation. The front of the phone also sported a camera. This second camera on the front could indicate the possibility of video-conferencing for the next iPhone.

Gizmodo's Chen took the entire phone apart to see if the device's innards could verify its origin. "Once I opened it up, I was completely sure it was an Apple product," Chen said. He explained that the case could have easily been mocked up by a machinist trying to create a fake, but the internal parts, says Chen, were perfectly crafted.

But Chen said that even after dissecting the device, piece by delicate piece, he still could not tell whether the prototype could run on cellular networks other than AT&T, Apple's exclusive nationwide carrier.

Chen's in depth write-up, photo gallery and videos of the device garnered huge traffic Monday for Gizmodo, more than 3 million views in its first 12 hours online. Some speculated that this was an ingenious ploy by Apple to create a viral marketing campaign.

CNet's Tong said he douted that.

"There is no way they are playing us,'' he said.

Then, late Monday night, Lam said Gizmodo got a letter that confirmed its suspicions.

The letter came from Apple's senior counsel.

"It has come to our attention that Gizmodo is in possession of a device that belongs to Apple," it said. "This letter constitutes a formal request that you return the device to Apple. Please let me know where to pick up the unit."

The tech community has been buzzing about how Jobs may have reacted to the apparent leak. "The brand that is Apple, and everything that comes out of it from start to finish is meticulously built and crafted and controlled. I don't know what Steve Jobs does when he loses control. But I don't want to be around him right now," said Tong.

Gizmodo's Lam says the device has been returned and in a note to Apple, Lam made this request: "I hope you take it easy on the kid who lost it. I don't think he loves anything more than Apple."