TracFone resellers held liable for DMCA violations

TracFone Wireless, Inc. v. Dixon, -- F.Supp.2d --, 2007 WL 570540 (M.D. Fla.)

In this uncontested case, TracFone achieved an unsurprisingly broad reading of copyright, trademark and unfair competition law against defendants who bought and resold TracFone prepaid phones in bulk. Part of defendants’ conduct was “unauthorized and unlawful” unlocking of TracFone phones, “alteration” of TracFone’s software, and sale of “counterfeited” phones to end users. The fact that the case was uncontested makes it inherently a bad one for legal doctrine, but I’m having a hard time figuring out what was counterfeit about the phones – there is no allegation that these were other than TracFone-manufactured phones.

Likewise, the allegation about software was that the phones were “hacked” to “erase, remove and/or disable” TracFone’s copyrighted software. The court found that this conduct constituted trademark infringement, copyright infringement, and violation of the DMCA, and probably other legal violations as well. I can see trademark infringement if the phones weren’t properly marked as varying from original condition, but erasing, removing, and disabling software doesn’t, as far as I know, implicate any exclusive rights of a copyright owner, any more than my recycling of my old newspapers does.

The court addressed the recent exemption for certain cell phone-related conduct in the Library of Congress DMCA exemption proceedings. Because that exemption allows circumvention “for the sole purpose of lawfully connecting to a wireless telephone communication network,” the court ruled it inapplicable – defendants were circumventing for the purpose of profitable resale, not connection. (I would read the exemption more broadly, since the Librarian made clear that the “sole purpose” requirement is directed at preventing things like circumventing copyright controls on ringtones; the ability to connect to a wireless network is central to the ability to resell the phone. The rulemaking itself speaks of the “consumer,” but also points out that firmware-imposed restrictions on switching networks have nothing to do with the incentives at which copyright is directed, so copyright owners as such have no interest in maintaining firmware locks.)

Intriguingly, the court stated that, because the exemption didn’t apply, the court need not address its validity, suggesting that TracFone had argued in the alternative that the exemption was improperly granted – perhaps a sign of future ligitation strategy against a defendant who chooses to fight back. TracFone submitted untimely comments to the Librarian, which were not considered in the rulemaking (search for “wireless” to find the relevant portions). Possibly TracFone thinks that its failure to comply with the Librarian’s rules justifies relitigating the exemption in court.

TracFone also alleged defendants engaged in fraudulent manipulation of TracFone’s Refer-a-Friend promotion through their websites, which used TracFone’s marks and logo to deceive consumers into thinking they were legitimately associated with TracFone, recruited customers to claim free airtime, then sold the airtime to unsuspecting third parties. The court granted relief on these claims as well; though the court’s laundry list of liability didn’t distinguish between the cell phone resales and the websites, my guess is that the applicable claims were trademark infringement, “domain name misuse” (the ACPA isn’t mentioned, and one of the offending websites didn’t use any variant of TracFone in the top-level URL), and various common-law torts.