"Our legal team told us that in California the law states, "If it is lost, the owner has three years to reclaim or title passes to the owner of the premises where the property was found. The person who found it had the duty to report it." Which, actually, the guys who found it tried to do, but were pretty much ignored by Apple," Lam wrote.
In considering whether to charge Chen, the DA's office "had a conflict between the penal code and the 1st Amendment and California shield laws," according to Morley Pitt, San Mateo County's assistant district attorney. "We felt that the potential Gizmodo defendant [Chen] had a potential 1st Amendment argument -- one that we weren't prepared to address on this particular set of circumstances."
However, "[Chen's] claim was that he was undertaking a journalistic investigation," Pitt said
Picking up a lost prototype is not a crime
A reporter – or anyone else – who buys a piece of stolen property without knowing it was stolen has not committed a crime, although they may have to return the property when they find out.
A reporter – or anyone else – who buys a piece of property that was lost or abandoned and whose ownership is therefore unclear, has also not committed a crime.
In 1971, RAND Corp. employee Daniel Ellsberg was eventually charged with espionage after he photocopied the confidential Dept. of Defense documents that came to be known as the Pentagon Papers and eventually turned them over to New York Times reporter Neil Sheehan.
Sheehan and the NYT were named in an attempt by the Nixon Administration to suppress the documents, but wasn't charged individually with having done anything wrong.
Most district attorneys lean the same way Santa Clara County's did, and for the same reasons – based on the huge influence of the Supreme Court decision letting Sheehan and the NYT off the hook in the Pentagon Papers case.
Jason Chen's situation may have been more complex because there was an object involved that Apple wanted to have back, and Chen paid far more ($5,000) for the prototype than he would have for a phone that wasn't an Apple super-secret prototype.