By Neil Hughes

Published: 06:20 PM EST (03:20 PM PST)

Allegedly "lost" in a bar in Redwood City, Calif., Apple's next-generation iPhone prototype was obtained and revealed by Gizmodo months before its expected formal announcement by paying a hefty sum.

On Saturday, Engadget originally posted a story with photos of the fourth-generation iPhone hardware. The story was updated numerous times, including one addition by editor Joshua Topolsky that suggested the photos may have been of a fake device. That update said the owners of the purported iPhone prototype were seeking $10,000 for the hardware, though the information was later removed from the post.

Then, on Monday, Gizmodo's Jason Chen posted a hands-on look at the hardware, including a teardown of the device to reveal its inner, Apple-branded workings. Prior to that bombshell, the website had remained suspiciously quiet about the photos posted by Engadget.

Following Monday's story, the founder and owner of Gawker Media -- the parent company of Gizmodo -- bragged on Twitter that he is willing to pay for exclusives. Nick Denton did not, however, reveal how much his company paid for the iPhone scoop.

Update: Later Monday, the Associated Press revealed that Gawker paid $5,000 for the device.

Denton also discredited what he called "a few clueless geeks" who think "real journalists" wait for Apple to make a formal announcement of a product. "Screw that," Denton wrote on Twitter, where his profile refers to himself as a "gossip merchant."

While the traffic count for Gizmodo skyrocketed Monday and the website refrained from publishing any other news for much of the day, the story behind the iPhone 4G prototype -- including where it came from and how the publication obtained it -- remained unknown. But Denton teased that more information is forthcoming: "For people who want to know the backstory to Gizmodo's iPhone exclusive, it's coming. And it's a corker."



Gawker also owns Valleywag, which gained attention in January when it offered a "bounty" of up to $100,000 for anyone who would let them use a then-unannounced iPad for one hour. Apple's lawyers quickly responded with a cease-and-desist letter, alleging that the "bounty" was in violation of California laws protecting trade secrets. Valleywag editor Gabriel Snyder responded by publishing the letter from Apple's attorneys, and encouraging any who might seek the cash reward to "stay within the bounds of the law" and use anonymous e-mail addresses. "We can't tell Apple who you are if we don't know who you are," Snyder wrote.

Though nothing has been said in public, it's likely that Apple's attorneys will also become involved in the iPhone 4G prototype leak. After Gizmodo's story went up Monday morning, Daring Fireball's John Gruber shared information from sources who suggested that the device is considered "stolen" from Apple, not lost.



The leak takes away much of the mystery that would have otherwise surrounded Apple's anticipated unveiling of the next-generation iPhone at its annual Worldwide Developers Conference, expected to be held in June. It's also an extremely unexpected turn of events for Apple, a company that goes to great lengths to keep its unannounced products under tight wraps.

Before the iPad was released -- but after it was unveiled -- some developers and publications with advanced units were allegedly required to keep the hardware "under padlock and key," as News Corp. CEO Rupert Murdoch put it.

Another report claimed that developers who had an iPad prior to release had to lock the hardware to an immovable object in an isolated room where all of the windows were completely blacked out. Those developers were also required to sign and submit more than a 10-page non-disclosure agreement along with photographic evidence that they've met all of the provisions set forth.

Apple's tight-lipped nature was profiled last year by the New York Times, which said the company's veil of secrecy began to take shape around the release of the original Macintosh back in 1984. One employee said that employees working on secret projects must "pass through a maze of security doors, swiping their badges again and again and finally entering a numeric code to reach their offices." Employees in these top-secret areas are allegedly monitored by surveillance cameras as they work, and those working on the most sensitive projects are reportedly required to "cover up devices with black cloaks when they are working on them, and turn on a red warning light when devices are unmasked so that everyone knows to be extra-careful."



Gizmodo said that Apple took its own measures to conceal the iPhone 4G prototype it obtained, going as far as to wrap it in a plastic case housing that made it look like an iPhone 3GS. The report called the case a "perfect disguise."

But Apple also sometimes leaks information to its advantage, as one former marketing manager explained earlier this year. Whether or not the leak was intentional, it's the second high-profile reveal of an Apple device before its formal announcement this year. Hours before Apple co-founder Steve Jobs introduced the iPad, a photograph of the hardware alleged to be taken from inside Apple's headquarters was leaked to Engadget.