Tracfone Wins Against Phone Unlockers
Tracfone, the largest prepaid carrier in the U.S., has been suing companies left and right that have been buying their subsidized phones en-masse, reflashing the software on the phones, and reselling the phones somewhere else at a profit. That cuts into Tracfone’s bottom line, so they used the courts to sue companies that are doing it. And apparently, they’ve won several of these lawsuits.
Normal phone unlocking is usually fairly straightforward. On most recent Nokia devices, you usually enter a code on your numeric keypad that erases the SIM lock for a device. It’s a well-known enough process that sites have code generators available that you enter in some information and a code pops out that will unlock your phone. Other devices may require special hardware to unlock the device, including Nokia phones where you have entered the unlock code erroneosuly too many times.
Unlocking the phone so it accepts a different SIM is one issue. Like many carrier-branded phones, Tracfone’s phones have specific customizations for their service. Unlike with most carrier-branded phones, which do not generally inhibit you from using the phone on a different network, Tracfone phoners contain special software to manage the prepaid units you have available. The way the software works makes the phone incompatible to use on any other network. Conversely, you will not be able to use any unlocked handset with Tracfone as that special software is required.
The only way to make Tracfone phones usable on other networks is to use specialized hardware to reflash the phones. Phone flashing hardware is fairly unique to each handset model and it’s not something the manufacturers give to just anyone. My guess is that these companies are either using illictly obtained hardware to do the flashing or are using flashing hardware that was reverse-engineered.
While it’s no secret I am not particularly fond of subsidized handsets, nor am I particularly fond of the way Tracfone locks down their handsets, Tracfone is well within their rights to run their business in this manner. If companies are taking advantage of this illegally, Tracfone should be taking them to court.
I am trying to figure out what exact laws were broken here. My guess is a combination of fraud laws–the “resellers” are unbranding the phones and selling them as “new”–and DMCA violations. The U.S. copyright office did issue an exemption that allows individuals to circumvent these software locks for the purpose of using the phone with any network, but I doubt that exception applies to companies trying to resell the handsets for profit. If anyone knows for sure what law was broken, please post it in the comments.
Disclaimer: My employer may have a different view of this whole situation, so the views herein are mine.
Via IntoMobile, HotCellularPhone, StreetInsider
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Comment by spg
the replacement software being flashed onto the phones could possibly be pirated. but i do not see any other area where a law is being broken. it seems to me only logical that it should be at least completely legal to buy the phone and ship them out of the country(as what they are new, used whatever they should be called). it would then be the laws in the other country that would apply to the actual re flashing of the phones. i can tell you that from traveling in many part of the world that when you go to countries where subsidized phone are not the norm the shelves tend to be dominated by prepaid phones from various western countries where they are subsidized. the exception is in countries that have special import taxes on cell phones(and usually other electronics) and therefore strict regulation on imports to prevent tax evasion.
Comment by PhoneBoy
Likely the software being flashed on the phones IS pirated. However, wouldn’t the manufacturer be suing if that was the case? I haven’t heard Nokia or other manufacturers being involved in these lawsuits, but maybe I’m wrong.
Comment by spg
it is in nokia financial benefit to sell the maximum number of phones. so they would have little motivation to sue since they profit nicely from these transactions.
Comment by Christopher Price
The U.S. Copyright Office has ruled that SIM subsidy locks do not violate the DMCA. The question here, is if the firmware is acting as an alternative SIM subsidy lock. I say it is… much like how iPhone has an internal lockdown matrix which is acting as a second activation hurdle which must by bypassed.
I don’t see the software being flashed onto the phone as being pirated. A phone owner has a license to the underlying operating system in the phone (at least, an implicit license… most phones don’t carry an EULA… yet).
Thus, once you flash the software back onto the phone, even though it is unbranded… it’s the same underlying kernel and core. You’re just removing the arbitrary code that Tracfone has added.
My advice to Tracfone: Re-structure your business model to make phone unlocking a non-issue. Or, have manufacturers create truly custom models that have no suitable firmware replacement.
Comment by PhoneBoy
@christopher: Actually, those prepaid phones do have an EULA of sorts that basically say “you will use this phone only in conjunction with our service.” The U.S. Copyright office has granted a temporary exemption permitting end users to buy phones and use them with another service, essentially making that part of the EULA unenforceable while the exemption is in effect.
These businesses that are basically doing the same thing are getting sued–and losing. This is the crux of why I want to know exactly on what legal grounds they are winning these lawsuits. It reeks of a double-standard, something I try and avoid where possible.
In my opinion, if you have to use the legal system to continually enforce your business model, something’s wrong with your business model.
Comment by Christopher Price
But where do the prepaid phones say that? I don’t see anything on the phone that says “by turning this phone on you agree with the EULA in the packaging.” I don’t see anything on the phone that says, when you power it on “by using the phone you agree to an EULA.” The service operator cannot imply an agreement to a contract that the user was not presented with.
I could see the courts deciding in favor of the operator on the basis that an unlocking company should have known the terms of the EULA due to the volume of their business. That would separate them from the end-user exception.
However, I think one of these cases will have to wind up being appealed before we see clear judicial review of the whole matter of unlocking. Considering unlockers generally don’t have the financial resources to do that… it may be awhile before this matter gets cleared up.
Comment by PhoneBoy
I’ve never opened up a TracFone, but I remember seeing verbage like “Your TRACFONE can only be used through TracFone Wireless, and cannot be activated with any other wireless or cellular service” on the back of the packaging. Similar verbage exists on the GoPhone packaging. I’ll have to go check next time I’m in a store that sells Tracfone and see exactly what it says.
I think you’re right on the lawsuit front, though. It’s going to take someone with money to appeal these decisions so we can see what the real issues are.
Comment by flashover49
Ok, how can I use an unlocked phone as a tracfone? The phones they sell seem to eat power like its candy. I have a new phone and would like to use the old for my kids on a tracfone network. Can I do this and if so how?
Comment by flashover49
If you can flah the phone with their software where do you get it?
Comment by PhoneBoy
@flashover49 Can’t use an unlocked device with Tracfone. Their phones contain special software which, in theory, will only come on a Tracfone device. It is not possible to “download” this software anywhere to install on a non-Tracfone phone.