The U.S. District Court, Southern District of Florida recently ruled that the unauthorized "unlocking" or "reflashing" of cellular devices, a process that allows consumers to unlock or recode their cell phone, enabling device-compatibility with lots of cellular service providers, violates federal copyright and trademark law. TracFone Wireless, Inc. v. Technopark Co., 281 F.R.D. 683 (S.D. Fla. 2012).
The plaintiff, TracFone Wireless, Inc., purportedly the largest provider of prepaid wireless telephone service in the United States, claimed that Technopark sold hardware (Octopus Boxes) and software that enabled consumers to circumvent its copyrighted and proprietary software, rendering TracFone branded devices inoperable on its wireless virtual network and causing irreparable harm to its revenue stream.
The court's opinion mirrored that of a suit in 2006, when TracFone sued Sol Wireless Group, Inc. claiming that it violated § 1201(a)(1) of the Digital Millennium Copyright Act (DMCA) by circumventing its cell phone locks to gain access to the protected work (i.e., the firmware). TracFone Wireless, Inc. v. Sol Wireless Group, Inc., No. 05-23279-CIV (S.D. Fla. Feb. 28, 2006) (final judgment and permanent injunction).
The Technopark court held that "Technopark's actions in reflashing or otherwise modifying the federally copyrighted TracFone Prepaid Software … create[d] an unauthorized reproduction and derivative work of the … Software." Further, it held that "Technopark engaged in this conduct for the purpose of reselling the altered devices for a profit, and not for the sole purpose of lawfully connecting to a wireless telephone communication network." The court also found Technopark contributorily liable for trademark infringement because the "sale of unlocking and/or reflashing boxes … contributed to the creation of express and implied misrepresentations that the TracFone Prepaid Phones, as sold by [Technopark's] co-conspirators, were created, authorized, or approved by TracFone, and may be used with TracFone's prepaid wireless service." Ultimately, the court awarded TracFone damages in the amount of $10,000 ($2,500 per unlocking device that Technopark manufactured and distributed), due to TracFone's election to collect only statutory damages under the DMCA.
As set forth above, manufacturers and distributors of such unlocking devices are advised to ensure that their conduct is for the sole purpose of lawfully connecting to a wireless telephone communication network, and not of reselling the devices for a profit. The difference could mean a violation of the DMCA.