How Your Cell Phone Became a Perching Felony: About the Recent DMCA Transition to Making Cell Phone Unlocking Illegal
Before you read any further, go read and take note of this petition. You may want to sign it (I did), but context will help in reading this blog post. In case you’ve been studying really, really hard for the Bar Exam, or were suffering from a surprise case of “dead” over the last week, you inevitably heard that the process of “unlocking” cell phones, previously legal, is now illegal because of government fiat. For those who may not have understood or thought to ask, “unlocking” is not the same as “jailbreaking.” In a nutshell, jailbreaking involves making it possible for a device to run code either from sources the manufacturer did not intend the device to be able to use or to run code the manufacturer did not intend it to be able to run (though most people talk about Apple IOS devices, Sony, for example, will note that other devices can also be “jailbroken”). Unlocking, however, involves making it possible for a device intended for use on one wireless network to be used on a different network – wireless devices sold by a particular wireless company are generally, but not always, sold programmed so that they can only use that company’s network.
Regular readers of Internetbizlaw and the Centre Knowledge blog know that I am pro technology consumer, and very cynical about the “graying” of property rights. I am not going to spend a lot of time in this post discussing the “right and wrong” of legalizing unlocking, or not, but everyone should understand a few facts:
Fact: Wireless companies sell phones to subscribers at rates lower than the retail price of the phone in exchange for lengthy contracts – 1 to 2 years (The term “subsidized” is probably inaccurate, though commonly used – the existence of a top of the line phone, the nexus 4, at a price in line with these lower rates, the absence of any request by carriers for return of phones at the end of contracts, the rapid drop in prices of phones in the face of planned obsolescence, and the fact that some phones, including the IPhone 5, are now sold “unlocked,” suggest that the “retail price” of phones includes a healthy, if not corpulent, profit margin, and the reduced prices more closely reflect the market value of the phones). Fact: Simple math tells us that by the end of his contract, the average wireless subscriber who pays $200 up front for a phone with a “retail price” of $700, paying a minimum of $60/month for 24 months, pays far more than the price reduction he was given. Fact: American full-payment wireless subscribers subsidize service to low-income subscribers – they are overpaying for service. Fact: at least parts of various wireless companies’ networks may have been built on government subsidies and otherwise these companies benefited from what amounted to massive tax subsidies. Fact: Profits for wireless carriers have little, if any, to do with the product they provide or the numbers of people they provide it to: just for example, Verizon’s profits grew even as its rate of subscriber growth slowed, and AT&T made “solid profit” despite lacking enough handsets to satisfy demand. Fact: wireless spectrum is leased to wireless carriers by the FCC, which controls the spectrum in public trust for American citizens, and the wireless carriers then sell access to the spectrum to consumers – the American citizens who “own” the spectrum in the first place. Fact: The U.S. provides slower, less reliable, more expensive Internet access than much of the rest of the world – in fact, despite cell company claims that average bills are shrinking, it appears they are actually growing.
The recent controversy comes from the Library of Congress’ (“LOC”) interpretation of the Digital Millennium Copyright Act (‘‘DMCA’’), specifically Chapter 12 of Title 17 of the United States Code, which prohibits “circumvent[ion of] a technological measure that effectively controls access to a [copyrighted] work.” 17 U.S.C. 1201(a)(1)(A). Without going into detail, the “locking” of a phone involves coding, which at least arguably involves the control of access to copyrighted code. More strange, every person I have spoken to about this matter has uttered a sound similar to “Hwah??” when they realize the rule barring unlocking cell phones comes from the LOC, not directly from a court or Congress. To explain, 17 U.S.C. 1201(a)(1)(C) requires the Librarian of Congress to hold a rulemaking proceeding to determine categories of work exempt from the prohibition against circumventing electronic controls.
A little history is in order: The DMCA was passed in 1998; including the most recent, there have been 5 LOC rulemakings. Here are links to all but the last one, 2012. Notably, in 2006 (see paragraph 5), the LOC exempted:
Computer programs in the form of firmware that enable wireless telephone handsets to connect to a wireless telephone communication network, when circumvention is accomplished for the sole purpose of lawfully connecting to a wireless telephone communication network.
Computer programs, in the form of firmware or software, that enable used wireless telephone handsets to connect to a wireless telecommunications network, when circumvention is initiated by the owner of the copy of the computer program solely in order to connect to a wireless telecommunications network and access to the network is authorized by the operator of the network.
Sound familiar? So, until recently, unlocking cell phones was entirely legal.
In the literally hundreds and hundreds of posts about this fairly significant change in the law, I have yet to see anyone point to the actual language used by the LOC in its October 26, 2012 rulemaking to suddenly make cell phone unlocking illegal. As much fun as pontification and rehashed pontification may be, here is the moving part in the flesh (37 CFR 201(b)(3), or p. 65278, column 2, ¶3) – the LOC exempts:
Computer programs, in the form of firmware or software, that enable a wireless telephone handset originally acquired from the operator of a wireless telecommunications network or retailer no later than ninety days after the effective date of this exemption to connect to a different wireless telecommunications network, if the operator of the wireless communications network to which the handset is locked has failed to unlock it within a reasonable period of time following a request by the owner of the wireless telephone handset, and when circumvention is initiated by the owner, an individual consumer, who is also the owner of the copy of the computer program in such wireless telephone handset, solely in order to connect to a different wireless telecommunications network, and such access to the network is authorized by the operator of the network.
This language is so muddled it makes the Magna Carta read like a shopping list (“… Butter, milk, eggs, chocolate chips, and equal protection under law…”). It appears, at least, that the LOC as of October 26, 2012, made it legal until 90 days (January 26, 2012 or thereabouts) to unlock phones. After that, such activity became copyright infringement under 17 U.S.C. 1201(a)(1)(A).
Start your truck, we’re looking at driving through…
First, since this falls under Copyright law, and 17 U.S.C. 1201 lists at least some (but not all) defenses to Copyright infringement, should those defenses, including fair use, be available? Here’s a hint, look at 17 U.S.C. 1201(c)(1).. (“Nothing in this section shall affect rights, remedies, limitations, or defenses to copyright infringement, including fair use, under this title.”). Are carriers really going to sue people? Who has standing, the manufacturer of the phone? The new carrier? The original carrier? All three? Why would the manufacturer or new carrier ever sue?
Second, what does “a wireless telephone handset originally acquired from the operator of a wireless telecommunications network or retailer” mean? Assuming it means what it says, what if I give someone my brand new phone and they sell it back to me? What if my friend and I both swap identical phones? This seems like a pretty big hole. I pilot twin Droid Bionics (think “Razr Maxx with half the battery life and a user-swappable battery” – one for backup and development) on Verizon (not at the same time), both bought from third-party prior owners, not Verizon — can I unlock them? Maybe: the October 26, 2012 rulemaking, after defining “legacy phones” as “used (or perhaps unused) phones previously purchased or otherwise acquired by a consumer” continues, “[t]he Register concluded after a review of the statutory factors that an exemption to the prohibition on circumvention of mobile phone computer programs to permit users to unlock ‘legacy’ phones is both warranted and unlikely to harm the market for such programs.” Sounds simple, right?
To test this theory, I called Verizon after the loophole closed and told them I wanted to unlock the phone not currently being used on my account to put it on a prepaid network. I was told that they will not unlock their devices unless the owner is relocating abroad. Have I satisfied the “if the operator of the wireless communications network…” language? Now that the loophole has closed, does it still matter? Since mine are “legacy phones,” did it ever?
Finally, the criminal section for Copyright violation is 17 USC §1204 and reads in relevant part that prison may be in the cards for “[a]ny person who violates section 1201 or 1202 willfully and for purposes of commercial advantage or private financial gain…” (Emphasis added) If I have an unused cell phone and I want to use it on a different network than the one that originally sold it, assuming without argument that my effort to unlock is “willful,” is it “for purposes of commercial advantage” (probably not) or “private financial gain” (does getting access to cheaper wireless qualify)?
So what we have here is an inconsistent and illogical rule, reversing at least 6 years of the opposite rule, with limited justification and basis, and huge, poorly defined loopholes, sewn together with the threat of civil persecution and criminal prosecution. Doesn’t it make more sense to just sign the petition?