February 16, 2006 | By Fred von Lohmann

DMCA Used to Block Cellphone Secondary Market

Here we go again, another example of the DMCA being used to block competition in secondary markets. First we had the lawsuit to block refilling of Lexmark toner cartridges. Then the lawsuit to block interoperable clickers for garage door openers. Then the lawsuit to block independent service vendors from servicing enterprise data storage systems.

Now we have TracFone, "the largest provider of prepaid wireless telephone service in the United States," invoking the DMCA [complaint, PDF] against a company that reprograms locked TracFone handsets so that you can use other network providers. (The Wireless Alliance has asked the Copyright Office for a DMCA exemption for cellphone unlocking, thanks in part to lawsuits like this.)

TracFone gives away locked Nokia handsets at below cost, hoping to make it back by selling you minutes. The rest is obvious to anyone who paid attention when vendors tried the same thing with CueCat bar code scanners and Ritz digital disposable cameras. A competitor jumped in, bought the below-cost handsets, unlocked them, and started selling them.

So TracFone has called in the lawyers, hoping the DMCA will shut down the secondary market and prop up their business model (there are also trademark, unfair competition, and tortious interference claims).

Reasonable minds may differ about whether the defendant here, Sol Wireless Group, deserves to be punished for its business practices. But it is hard not to conclude that this is another unintended consequence of the DMCA, and another example of the DMCA impeding competition in a realm far removed from movies and music.

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