A couple of clarifications (since gizmodo has it wrong; but I am unable to comment there):
The gizmodo article implied that Apple rejected the icon because it used the flag of the Philippines and not because it was trespassing on an Apple graphic. Well, that is flat wrong. The rejection was very specific. It was because the reviewer believed that it was a copy of the copyrighted APPLE graphic. Apple was not rejecting it to protect me from the law of the Philippines.
So, dear giz, love you, but you got it all wrong..
Couple other points-
1) The Apple reviewer obviously made a mistake. It is not the same. It is not a copy and is unique when looked at closely. Yet, it was a careless mistake as this App has been reviewed 3 previous times and this was never raised as an issue.
2) I was surprised that Apple would claim that THEY can copyright a flag icon. Per the earlier info from ZZ, this does not look legal.
3) Clearly Apple is not implying they have any ownership of the Philippines or are trying to violate the law. It is just a little ironic that they claim a copyright violation of their own graphic when the use of the graphic by Apple is even questionable in this case.
4) The interesting twist is that from this discussion, it is now clear that I should NOT be using the flag as part of the icon either. (Not because of Apple, but because of the Philippine law). Wow, tables turn again.

So, back to the icon drawing board....
Lets not beat up on Apple too much here. I am very unhappy that ~2000 people are still unable to use iManila because of a faulty review. Yet, it is likely the reviewers are really trying to move quickly through the large number of apps being submitted. Mistakes will happen. Yet, hopefully by bringing these out publicly, Apple can continue to improve their business process (which does not reflect their normal very high quality).
So, if anyone has any good icon ideas, I am interested
