Dec 10, 2019

Axios Login

By Ina Fried
Ina Fried

It looks like you are reading a newsletter. (Yes, I let Clippy write the intro today.)

Meanwhile, today's Login is 1,433 words, a 5-minute read.

1 big thing: Apple sues former employee over new chip venture

A picture of Apple Park, Apple's "spaceship" campus in Cupertino. Photo: Ina Fried/Axios

Apple is suing a former employee who started Nuvia, a server chip startup that has hired at least eight former Apple workers.

Why it matters: The suit is already bringing forth unusual disclosures from inside the secretive tech giant, including allegations Apple illegally searched its former employees' private text messages.

The background: Apple filed suit against Nuvia founder Gerard Williams III in Santa Clara Superior Court in California back in August, alleging breach of contract and breach of duty of loyalty. Apple is seeking an injunction, punitive damages and other remedies.

  • Williams spent 9 years at Apple, most recently as a senior platform architect, designing chips for the iPhone and iPad.
  • Nuvia announced itself publicly last month, saying it had raised $53 million in funding from Capricorn Investment Group, Dell Technologies Capital, Mayfield and WRVI Capital, among others.

What Apple's saying: According to Apple, Williams breached his contract with Apple by planning Nuvia and recruiting former Apple workers for it while still working for Apple. It also alleges that some of Nuvia's technology results from Williams' work at Apple and therefore belongs to the company under the intellectual property agreement signed by all employees.

"This case involves a worst-case scenario for an innovative company like Apple: A trusted senior director with years of experience, and years of access to Apple’s most valuable information, secretly starts a competing company leveraging the very technology the director was working on, and the same teams he was working with, while still employed by Apple."
— Apple, in the introduction of its suit

What Nuvia's saying: Nuvia says many of the provisions in Apple's contract violate state law, which generally favors employee mobility. It also says Apple's gathering of text messages was illegal.

"Apple, an early beneficiary of the creative forces that formed and continue to drive Silicon Valley, has filed this lawsuit in a desperate effort to shut down lawful employment by a former employee .... To further intimidate any current Apple employee who might dare consider leaving Apple, Apple's complaint shows that it is monitoring and examining its employees' phone records and text messages, in a stunning and disquieting invasion of privacy."
— Nuvia, in court documents responding to Apple's suit

Between the lines: Apple positions itself as pro-privacy, and searching through employee phone records and text messages probably won't help that image. While the lawsuit doesn't specify how Apple came to acquire the call records and text messages, while Williams was an employee there could have been information on his Apple-owned devices or server backups of those devices.

Yes, but: No one in Silicon Valley really thinks Apple's pro-privacy stance extends to the work-related actions of its own employees. The company is famous for guarding its secrets and hunting down leaks or anyone who it believes might be taking its information. That said, California law generally frowns upon non-compete and non-solicitation provisions.

The big picture: The history of Silicon Valley and the chip industry in particular is one long saga of teams of engineers leaving one company to start another.

  • The "traitorous eight" left Shockley to start Fairchild in 1957.
  • Key Fairchild employees left to start Intel in 1968.

Our thought bubble: As Berkeley professor AnnaLee Saxenian has argued, this kind of mobility of brains and skills is what made Silicon Valley. Whether Apple wins or loses its case, it's pushing against its own industry's DNA.

2. Exclusive: Google funds local news startup

Berkeleyside founders Lance Knobel, Frances Dinkelspiel and Tracey Taylor. Photo credit: Tippett Studio

A new Oakland, California-based journalism venture will launch next spring with $1.56 million in funding from the Google News Initiative (GNI), executives tell Axios. It has also raised $1.56 million from the American Journalism Project, a new venture philanthropy nonprofit focused on local news.

Why it matters: It's the third local news organization that Google has funded this year as part of its larger $300 million effort to support journalism. But unlike the projects Google has previously backed, this initiative isn't serving a small town, but a city with 425,000 residents.

Yes, but: Like many other cities across the country, Oakland finds itself reeling from the economic crisis in local news.

  • In 2016, the Bay Area News Group (BANG) merged six daily newspapers into 2 publications, leaving Oakland without its own daily newspaper. The Oakland Tribune became a part of the East Bay Times, along with several nearby papers.

Details: The publication will launch as a website next spring with eight editorial staffers and hopes to grow to 20 by the end of the year. The team plans to launch a newsletter and is exploring other mediums, like podcasts. Its name is to be determined.

  • It's being launched by the same leadership team behind Berkeleyside, a local news outlet in Oakland's neighbor town. Lance Knobel, CEO of the new venture and Berkeleyside co-founder, says they launched the site because "Oakland needs more daily reporting." Knobel says the site's work will be additive to the current news ecosystem in Oakland.
  • The site's editorial team will be led by editor-in-chief Tasneem Raja, a former senior editor at NPR and Mother Jones. She said she received written assurance that Google would have no input whatsoever into editorial decisions.
  • The business model will be a mix of non-profit donations, live events and underwriting from corporations.

Go deeper:

3. Charted: Wearables market doubles
Expand chart
Data: International Data Corporation; Chart: Naema Ahmed/Axios

The market for wearables — from smartwatches to souped-up headphones — is surging. Last quarter, sales rose 96% from a year earlier, per IDC.

Why it matters: The market is shifting from a niche to the mainstream at a time where smartphone growth is slowing.

Apple led the way, thanks to the Apple Watch and AirPods. It sold 29.5 million wearables, up from 10 million in the same quarter a year earlier. Apple was followed by Xiaomi, Samsung, Huawei and Fitbit.

By category, smart earwear led the way, with shipments of 40.7 million devices, up from 11.9 million in the third quarter of last year.

What they're saying: "The rise of smart assistants in the home and on the phone has led to an increased demand for wearables that have the ability to connect with these assistants," said Jitesh Ubrani, IDC research manager. "With multiple form factors and the inclusion of smart assistants, the wearables market is well on its way to becoming a mass market device category rather than one that primarily caters to health and fitness."

4. TikTok chief delays D.C. charm offensive

Photo: Lionel Bonaventure/AFP via Getty Images.

TikTok head Alex Zhu canceled this week's D.C. meetings with lawmakers who have raised concerns about the popular video-sharing app, Axios' Margaret Harding McGill reports.

The big picture: The cancellation is fueling a fresh round of criticism from lawmakers who have already called out the Beijing-owned company over issues ranging from censorship to children's privacy.

Driving the news: A TikTok spokesperson said Zhu still wants to hold the meetings, just not this week.

  • "TikTok has no higher priority than ensuring Congress Members' questions are addressed fully and transparently," the company said in a statement. "To ensure these conversations are as productive as possible, we're postponing these meetings until after the holidays."

What they're saying: Republican Sens. Marsha Blackburn and Josh Hawley, who both had meetings scheduled with Zhu, were quick to call out the company on Twitter.

  • "What is the real reason TikTok has cancelled my meeting with CEO Alex Zhu? What are they really doing with your data and what type surveillance are they conducting on your precious children? TikTok — you owe us answers," Blackburn tweeted.
  • "NEWS: @tiktok_us just cancelled their meeting with me this week. Not willing to answer questions. Get a call from Beijing?" Hawley said via Twitter.
  • Hawley introduced legislation that took aim at TikTok last month, while Blackburn has pressed the company on digital gifts and children's privacy.

Context: The meetings with Hawley and Blackburn were part of a planned effort by Zhu to meet with some of the app's toughest critics on Capitol Hill, as reported by the Washington Post.

5. Take Note

Errata

  • An item in yesterday's Login on T-Mobile's Sprint deal misstated the number of customers Dish Network will be acquiring. Dish Network will be getting 9.5 million subscribers from Sprint, not 9.5 billion.

On Tap

  • Apple and Facebook executives are among those slated to testify before the Senate Judiciary Committee at a hearing on encryption and lawful access.

Trading Places

  • Nobel Prize-winning chemist Frances Arnold is joining the board of Google parent company Alphabet.
  • The FCC named Francisco Salguero as its chief information officer.  He previously spent 14 years at the USDA, most recently as deputy chief information officer.
  • Former NBC and NPR executive Vivian Schiller is joining the Aspen Institute to lead its tech and media programs.

ICYMI

  • Amazon claims President Trump improperly pressured the Pentagon to deny it a key cloud computing contract. (Axios)
  • Wag has laid off a number of employees and SoftBank has sold its large stake back to the company and vacated the company's board. SoftBank invested $300 million last year in a round that valued the company at $650 million. (CNBC)
  • Hayden Brown takes the reins as CEO of freelance platform Upwork. (Twitter)
6. After you Login

Talk about breathing new life into old technology.

Ina Fried