Intellectual Property Law

Supreme Court OKs Cellphone Unlocking Suit

By Ryan Singel, Kevin Poulsen, Sarah Lai Stirland, Kim Zetter, and David Kravets

The U.S. Supreme Court on Tuesday dashed a bid by T-Mobile and AT&T to stave off a class-action lawsuit challenging the carriers' policies against unlocking mobile phones.

The justices declined to review an October decision by the California Supreme Court that cleared the way for a lawsuit that attorneys claimed could represent "millions" of California customers.

In response to similar lawsuits, Verizon and Sprint, both CDMA carriers, have agreed to provide the software code to unlock cellphones after customers nationwide have completed their original contract, attorneys said. "That was the compromise we ended up with to get the cases settled," said California attorney Robert Bramson, one of the lawyers suing carriers T-Mobile and AT&T.

T-Mobile and AT&T fought the lawsuit all the way to the nation's high court. The two carriers, on the GSM network, are accused of unfair business practices by locking down their phones to their service plans. Last year, Librarian of Congress James H. Billington listed cell phone unlocking as one of six new exemptions to the Digital Millennium Copyright Act, or DMCA.

That change, however, left unclear whether carriers were responsible for unlocking the handsets.

The high court's decision sets aside language in the terms-of-service agreement requiring aggrieved AT&T and T-Mobile customers to submit to binding arbitration instead of going to court. The phone carriers urged the justices to require that their customers honor the contracts they had signed. The lower courts had declared those contracts "unconscionable."

The case the U.S. Supreme Court rejected on Tuesday, if successful, could force AT&T to unlock the coveted iPhone. AT&T is Apple's exclusive phone provider. "They may be more unwilling than otherwise because the iPhone is such a big seller," Bramson said.

The suits also prompted all four of the phone providers to reduce the fees charged to costumers who terminate a mobile phone contract before it expires.

Still, all four carriers face litigation to reduce those new, pro-rated fees even further. AT&T's plan, implemented Monday, is similar to the other carriers' opt-out schedule. Each month, an account holder's normal $175 charge to back out of the two-year contract is reduced by $5.

"Pro-rated is a step in the right direction," said California attorney David Franklin, one of the lawyers suing the carriers.

Passed in 1998 as an anti-piracy measure, the DMCA makes it illegal to "circumvent a technological measure that effectively controls access" to copyrighted material ? in this case the firmware that locks a phone to a provider's network. The law tasks the U.S. Register of Copyrights and the Librarian of Congress with investigating how the anti-circumvention provision could hurt legitimate users, and then carving out appropriate exemptions every three years.

The cell phone unlocking exemption covers cases where cell phone software locks are circumvented "for the sole purpose of lawfully connecting to a wireless telephone communication network."

See Also:

• Unlocking Your iPhone is Legal; Distributing the Hack, Maybe Not
• Unlocking Cellphones Now Legal
• New Unlocking Rule Good For You, IP Lawyer Says
• Sprint Agreeing to Unlock Phones to Settle Lawsuit; Awaiting Court ...
• Extra Extra: Threat Level Wants Your Apple Conspiracy Theory ...
• White House High-Security Locks Broken: Bumped and Picked at DefCon

Full post as published by Threat Level on May 27, 2008 (boomark / email).