Judge waives Apple, AT&T objections to antitrust case vs. iPhone
A US federal judge has shut down some attempts by Apple and AT&T to dismiss a class action lawsuit that accuses the two of violating antitrust law with their iPhone exclusivity agreement, pushing the complaint closer to a possible trial.
Northern California District Judge James Ware said in his 31-page decision that both Apple and AT&T are still potentially liable for violating state rules meant to preserve fair competition as well as claims that Apple alone was responsible for violating federal and California laws for abuse, computer trespass, and fraud.
However, it also grants dismissals to some claims of "unfair and deceptive" practices in jurisdictions outside of the states of California, New York and Washington, where Apple and the two original plaintiffs reside.
Submitted nearly one year ago, the original lawsuit begun by Paul Holman and Lucy Rivello charges the companies with allegedly maintaining unfair AT&T exclusivity for the iPhone until at least 2012 and hiding some of the after-sales costs of ownership. It also claims that Apple has locked the handset's software in such a way that use with other carriers, or even the use of third-party software on and for the phone, would be rendered impossible.
Apple is further accused of deliberately engineering iPhone 1.1.1 and other updates to break modified firmware and discourage some users.
In the dismissal, Judge Ware finds that many of the arguments made by Apple and AT&T to throw out the complaint run afoul of either the law or don't directly address the nature of the issue. Apple contends that customers were aware of entering an agreement for just two years and are still under those terms, and so aren't yet in a position where they could legally contest being locked to AT&T; that doesn't matter, according to the decision, as the claim is that customers weren't told that they may have no choice but to use AT&T for iPhone service for as many as three years after the contract expires.
The judge also heads off a motion by Apple to dismiss the case based on the company's recent addition of support for third-party apps in iPhone firmware 2.0. The real issue is an allegation that Apple knowingly limiting access to certain functions where it has a "financial interest," the ruling explains.
Other sections of the document also note that the claims fraud and trespass, both of which would have occurred by ruining modified iPhones, aren't necessarily invalidated by Apple's advance warning of possible damage to hacked phones by applying 1.1.1 or even the need to willfully download and install the update. Customers were reportedly never told at the beginning that potentially damaging updates could come in the future.
Judge Ware centers his dismissals of AT&T's claims around the cellular carrier's insistence on taking any disputes over iPhone contracts to arbitration. While AT&T believes that anyone who signed an iPhone contract affected by the lawsuit would also have agreed to arbitration and thus invalidated any right to file a lawsuit, the judge asserts that AT&T is violating laws in each of the three relevant states that make "unconscionable" any attempts to quash lawsuits by forcing out-of-court dispute settlements.
The lawsuit has the potential for further conflicts should the plaintiffs decide to modify their complaint or encounter further motions from the defendants, but for now is on track to a case management discussion among the involved parties on November 17th.
The conference will lay out the groundwork for discovering information relevant to the case that may reveal some of the inner workings of the exclusivity deal between Apple and AT&T: neither company has ever publicly described how long the iPhone will be available solely to AT&T in the US. At best, observers have had an uncorroborated claim by USA Today that would give AT&T exclusive rights until 2010, which is longer than the first iPhone contracts but two years ahead of the lawsuit's concerns.
Word of the judge's ruling was first reported by Law360.
Northern California District Judge James Ware said in his 31-page decision that both Apple and AT&T are still potentially liable for violating state rules meant to preserve fair competition as well as claims that Apple alone was responsible for violating federal and California laws for abuse, computer trespass, and fraud.
However, it also grants dismissals to some claims of "unfair and deceptive" practices in jurisdictions outside of the states of California, New York and Washington, where Apple and the two original plaintiffs reside.
Submitted nearly one year ago, the original lawsuit begun by Paul Holman and Lucy Rivello charges the companies with allegedly maintaining unfair AT&T exclusivity for the iPhone until at least 2012 and hiding some of the after-sales costs of ownership. It also claims that Apple has locked the handset's software in such a way that use with other carriers, or even the use of third-party software on and for the phone, would be rendered impossible.
Apple is further accused of deliberately engineering iPhone 1.1.1 and other updates to break modified firmware and discourage some users.
In the dismissal, Judge Ware finds that many of the arguments made by Apple and AT&T to throw out the complaint run afoul of either the law or don't directly address the nature of the issue. Apple contends that customers were aware of entering an agreement for just two years and are still under those terms, and so aren't yet in a position where they could legally contest being locked to AT&T; that doesn't matter, according to the decision, as the claim is that customers weren't told that they may have no choice but to use AT&T for iPhone service for as many as three years after the contract expires.
The judge also heads off a motion by Apple to dismiss the case based on the company's recent addition of support for third-party apps in iPhone firmware 2.0. The real issue is an allegation that Apple knowingly limiting access to certain functions where it has a "financial interest," the ruling explains.
Other sections of the document also note that the claims fraud and trespass, both of which would have occurred by ruining modified iPhones, aren't necessarily invalidated by Apple's advance warning of possible damage to hacked phones by applying 1.1.1 or even the need to willfully download and install the update. Customers were reportedly never told at the beginning that potentially damaging updates could come in the future.
Judge Ware centers his dismissals of AT&T's claims around the cellular carrier's insistence on taking any disputes over iPhone contracts to arbitration. While AT&T believes that anyone who signed an iPhone contract affected by the lawsuit would also have agreed to arbitration and thus invalidated any right to file a lawsuit, the judge asserts that AT&T is violating laws in each of the three relevant states that make "unconscionable" any attempts to quash lawsuits by forcing out-of-court dispute settlements.
The lawsuit has the potential for further conflicts should the plaintiffs decide to modify their complaint or encounter further motions from the defendants, but for now is on track to a case management discussion among the involved parties on November 17th.
The conference will lay out the groundwork for discovering information relevant to the case that may reveal some of the inner workings of the exclusivity deal between Apple and AT&T: neither company has ever publicly described how long the iPhone will be available solely to AT&T in the US. At best, observers have had an uncorroborated claim by USA Today that would give AT&T exclusive rights until 2010, which is longer than the first iPhone contracts but two years ahead of the lawsuit's concerns.
Word of the judge's ruling was first reported by Law360.
Comments
Also, if you have an issue with a phone not working on another carrier after the 2 year contract is up, why don't you go suing Verizon and Sprint for their locking down phones on their respective CDMA networks.
Get a f*ing life.
I remember how Apple made a rather big effort with public announcements that if your iPhone was jailbroken, or unlocked the updates could/would disable your phone. Those monkeys went ahead and rolled the dice and now come back to whine about why Apple did this, or that, or whatever. The software was hacked outside of Apple's control, and it's their fault?
I can imagine buyers of that Psystar garbage suing Apple if one of their updates renders their computer unusable.
Lawyers have just way too much time on their hands.
And like someone else stated.... Why are they just going after Apple and AT&T when every other cell phone manufacturer and wireless provider do the same exact thing.
I'm mad because the LG Dare doesn't work on T-Mobile.... I'm gonna sue LG and T-Mobile now.
God people are soo stupid.
So if they win this case does that mean Apple will be forced to manufacture CDMA/EV-DO iPhones for Verizon and Sprint? Even when the technology has no future?
I mean.. I think that would be worse... to have a phone that has to run on outdated and near useless technology after the contract ends (yes I know those networks will still be around for a while... but still)
The free market works quite well as long as there is healthy competition. If large companies are allowed to restrict competition, the result is higher prices, less innovation (eventually), worse service, and demands for government restrictions on prices. It is far better to prohibit anti-competitive behavior than to end up with regulated prices.
Of course, the same rules should be applied to all the players including Verizon and T-mobile. Countries with healthy free market economies like Hong Kong and Singapore absolutely prohibit selling locked phones. Other countries should too.
Let's say I move to another country, I am going to have to buy a new iphone because I wont be able to connect my iphone to any other network. Even if I stay in the United States, how can you be sure that in two years there won't be other GSM networks apart from T-Mobile that could potentially work with my iphone.
After two years, my iphone has been fully paid, everybody made a well deserved profit (Apple, AT@T), that should be enough... In other countries there is a limit of 6 months after which the operator has to give you an unlocking code, it does not mean that after that time all users rush to the store to get it unlocked, so why is Apple and/or AT&T not doing this after 2 years !
So all you people in the previous messages find it perfectly normal that after two years once the subsidy had been paid back to AT&T through the subscription fee, the owner should continue to have a locked phone that he can use nowhere else.
Let's say I move to another country, I am going to have to buy a new iphone because I wont be able to connect my iphone to any other network. Even if I stay in the United States, how can you be sure that in two years there won't be other GSM networks apart from T-Mobile that could potentially work with my iphone.
After two years, my iphone has been fully paid, everybody made a well deserved profit (Apple, AT@T), that should be enough... In other countries there is a limit of 6 months after which the operator has to give you an unlocking code, it does not mean that after that time all users rush to the store to get it unlocked, so why is Apple and/or AT&T not doing this after 2 years !
Perhaps when we actually GET to 2 years you will find out!
At the moment you are guessing what will happen.
I don't understand the hostility some posters have against the complainants, the judge doesn't accept Apples objections and neither does the law in some states. There is clearly something wrong.
But I am concerned about some of the software issues being raised here. It is a core responsibility of an operating system to be in charge of its users, peripherals and applications at all times. When that doesn't happen, the operating system is failing in its job: control. When a judge says that it is legitimate that users can hack an operating system and expect it to keep working, and that a system must be allowed to take any software that is produced, then the very nature of operating systems is compromised, and we can expect a future of microsoft windows-like instability, insecurity, performance and general chaos.
After two years, my iphone has been fully paid, everybody made a well deserved profit (Apple, AT@T), that should be enough... In other countries there is a limit of 6 months after which the operator has to give you an unlocking code, it does not mean that after that time all users rush to the store to get it unlocked, so why is Apple and/or AT&T not doing this after 2 years !
Exactly, this is the norm. Here, my operator has the obligation to unlock my phone after six months for free if I ask to. I'm still bound by contract for another 6 months (or even 18 months, but a recent law gave me a possibility to bail out after the first 12 months at a reduced cost), but I can put any SIM I want into my phone.
The great advantage is on holidays abroad : I can just put in a local prepaid SIM rather than pay outrageous fees to my operator.
Of course, the same rules should be applied to all the players including Verizon and T-mobile. Countries with healthy free market economies like Hong Kong and Singapore absolutely prohibit selling locked phones. Other countries should too.
I don't like the idea of locking phones to networks. I would prefer phones be equally accessible to all networks of the same band type.
Isn't the reason for certain phones to be exclusive to one carrier in the US is that by providing a "desirable" phone, the carrier (and Apple) can provide the exclusive phone to the masses at a much lower price-point compared to selling an unlocked phone? Correct me if I'm wrong on this.
Isn't the unlocked iPhone in Hong Kong going for some serious cash? If that is what buyers would expect to pay in the US (or most other countries in their native currency), then the iPhone would not have had the market penetration that it currently enjoys.
So while I do not necessarily approve of locked phones, I can understand why they do it. I still use my first-gen iPhone and had it been sold as a carrier-free phone for say $800, I would not have purchased it. Since I've always been an AT&T customers, the lower-subsidized cost was much more palatable for me.
I'm curious if AT&T will unlock my iPhone after the two years is up. I certainly hope they do unless there is a technological issue.
Just an opinion.
This would also make it clearer to consumers how much they are paying for the phone and how long it takes. After all, when you get finance for a new car, aren't they forced to tell you the total cost of the finance and how long it takes to pay it back? What we have with the phone subsidies is unregulated financing of loans.
I don't know what happens in the US when you get to the end of your first contract period, but I do know what happens in the UK, and I assume it's similar in the US and EU states:
I made a 1 year contract with T-Mobile and get a motorola phone for free. The phone is locked to T-Mobile. At the end of that contract, unless I accept a new contract from T-Mobile, I continue to use the phone on a rolling one month default contract which I can cancel at any time. I also have the right to demand that phone be unlocked, for which T-Mobile can charge an admin fee.
So your iPhone is only locked to AT&T for the initial lifetime of your contract with AT&T. AT&T's deal with Apple to offer new phones only through AT&T does not stop you from having AT&T unlock the iPhone so you can switch to T-Mobile.
Is this how it works in the US too?
Surely, Apple's deal with AT&T is to offer NEW iPhones exclusively through AT&T for a number of years, say five years. A separate contract between the consumer and AT&T is to lock the phone to that carrier for say two years, due to the phone subsidy. These two commitments are not the same.
I don't know what happens in the US when you get to the end of your first contract period, but I do know what happens in the UK, and I assume it's similar in the US and EU states:
I made a 1 year contract with T-Mobile and get a motorola phone for free. The phone is locked to T-Mobile. At the end of that contract, unless I accept a new contract from T-Mobile, I continue to use the phone on a rolling one month default contract which I can cancel at any time. I also have the right to demand that phone be unlocked, for which T-Mobile can charge an admin fee.
So your iPhone is only locked to AT&T for the initial lifetime of your contract with AT&T. AT&T's deal with Apple to offer new phones only through AT&T does not stop you from having AT&T unlock the iPhone so you can switch to T-Mobile.
Is this how it works in the US too?
If Apple wants to lock the device forever, they have every right. Whether they should or not is irrelevant. It's there intellectual property--they made it.
I've read the complaint in this case. It says that the US government has issued a ruling that says consumers have an absolute right to switch their cell phone carriers at any time. There is a statute called the Digital Millennium Copyright Act, and the carriers were trying legally to use this statute to lock ther phones for several years. But in December 2006 the Register of Copyrights ruled that the carriers could not do so. It ruled that people have the right to unlocked phones and that unlocking phones does not violate the carriers (or in this case Apple's) copyright in the operating software. Apple and AT&T entered their exclusive contract for the iPhone one month later. According to the complaint they were deliberately trying to prevent iPhone users from unlocking their phones even though the government had just ruled they could.