Apple's 3 iPhone Considerations: Liability, Liability and Liability

The Wall Street Journal last week raised a few Anywhere eyebrows with this paragraph at the end of an article titled Firms Hitch Wagons to iPhone. The paragraph that caused this fuss was as follows:

And those that have been sanctioned by Apple are finding out too late that they have guessed wrong about the depth to which Apple is willing to help them. Makers of location-based software expected to benefit from the new iPhone's global-positioning system. Yet they are finding out that Apple won't support "applications designed or marketed for real-time route guidance." The clause in the iPhone developer tool-kit agreement essentially voids months of work by TomTom NV and other navigation providers.

Could this be? Could Apple be an Anywhere spoilsport and refuse to allow location-based applications?

Now, being a registered developer, I have the software development kits [SDK] for both the Apple iPhone and Google Android [shameless research plug: Yankee Group clients should look for a Decision Note comparison of the two SDKs and how developers should choose between them to be published soon]. Unfortunately, the Apple SDK license terms are confidental, so I can't quote chapter and verse here (software license restrictions and end user license agreements are a rant for another post). However, I can provide my personal interpretation of Apple's legalese, which luckily isn't too tricky. Full disclosure: I am not a lawyer, and this opinion should not be construed as legal advice. Always consult your own attorney on legal matters.

Yes, the restriction noted by the Wall Street Journal exists, but the restriction isn't as severe as the WSJ implies. It's really all about the legal liability of location-based services, something too few companies or developers actually stop and think about.

The major points of the restrictions in clauses 3.3.7 through 3.3.9 of the license agreement are to prevent applications from:

• violating consumer privacy with location data (big privacy liability there)
• enabling stalkers (both bad karma and possible criminal accessory liability)
• routing people or vehicles incorrectly (encouraging people to pay attention to their iPhone distracts them when they should be looking out the windshield; ask anyone who has into a bridge or river based on GPS directions), or
• doing illegal things with location info (all the bad things that Apple legal didn't think of)

Personally, I find Apple's unwillingness to sign off on these types of applications without further scrutiny rather comforting. But does this leave GPS makers like TomTom (TMOAF.PK) out in the cold? Of course not, because any serious GPS manufacturer:

1. already has assessed and protected itself against this type of liability with liability insurance and other legal protections, and
2. could negotiate a different licensing agreement from Apple for its products provided it accepted legal liability for its application.

So rest easy: you'll see location-based applications on the 3G iPhone. But expect those to come from companies like TomTom and Garmin (GRMN) that actually know their Anywhere liabilities instead of from Joe's Homebrew GPS and Beer Company.

Comments

[fredr:]

That's pretty much correct. It doesn't matter if the SDK has restrictions. If you're a serious developers, you would contact Apple and negotiate a special agreement.

2008 Jun 30 01:20 PM

[pabs:]

good solid article that understands what is happening thank you, perhaps you could write for fortune and barrons as their writers generally seem to miss the point

2008 Jun 30 02:09 PM

[coffeetime:]

I always look forward to your analysis, Carl, and I believe that you are spot on. As a long-time (since March, 1991) investor in Apple, I understand how this stock is manipulated by traders. Up or down, I just have been hanging on for the ride, and what a great ride it has been. While others decry a "rich" P/E of 35, I wouldn't trade the growth potential of AAPL for "richer" companies such as Amazon.com (62), Ebay (87), Red Hat (57), Research in Motion (52) or Real Networks (100).

2008 Jun 30 03:25 PM

[Tom B:]

"While others decry a "rich" P/E of 35, I wouldn't trade the growth potential of AAPL for "richer" companies such as Amazon.com (62), Ebay (87), Red Hat (57), Research in Motion (52) or Real Networks (100)."

It astounds me how much people pay for one-hit-wonder AMZN. And Real just has a high P/E because they have minimal "E".

2008 Jun 30 03:50 PM

[DavidK:]

You are right on my friend. The ramifications of location data such as that used by the security people(like police depts) are or could be huge. Big brother at it's max. Some of us should think of the liberties that would sacrifice just for convenience of it. Not smart... not smart at all!

2008 Jun 30 10:59 PM

[chocha:]

Why in the world would apple put gps on the iphone if it was going to block location based software? I'm not saying apple is perfect (not by a long shot) but that would be so stupid. think about it

2008 Jun 30 11:20 PM

[chocha:]

Why in the world would apple put gps on the iphone if it was going to block location based software? I'm not saying apple is perfect (not by a long shot) but that would be so stupid. think about it

2008 Jun 30 11:21 PM

[mollytjm:]

another great article, Carl. i always look for yours. just as Apple is VERY careful about protecting it's computers from viruses, it's very careful about everything it thinks could harm it's product or product user. certainly microsoft never cares this much about it's consumer. Apple deserves praise for this and i'm really, really eager for July 11th.

2008 Jul 01 10:32 AM