Timothy P. Smith and the legal team of M. Van Smith and Damian R. Fernandez have filed for a class action lawsuit against Apple. The suit alleges that the company acted in violation of antitrust laws by tying sales of the Apple iPhone to AT&T's cell service and by "iBricking" the phone for users who installed software to unlock their phones.
The complaint also claims that iPhone customers have been damaged by the exclusive deal between Apple and AT&T, and also by the firmware update (1.1.1) that rendered many iPhones inoperable. The suit alleges that Apple's actions constitute an illegal trust in restraint of trade. While the complaint is attempting to create a class action lawsuit, only one person, Smith, was named in the initial filing.
Smith's complaint concedes that Apple warned users that its recent firmware update might result in their iPhones becoming "permanently inoperable." However, it goes on to say that Apple acted "in defiance and without sufficient consideration of consumers' rights" because the company "took no steps to issue an update with unlocked firmware or otherwise issue its update to prevent damage to unlocked iPhones."
In addition, the complaint claims that, "Apple forced plaintiff and the class members to pay substantially more for the iPhone and cell phone service than they would have paid in a competitive marketplace either for the iPhone or for AT&T's cell phone service."
Is Unlocking a Protected Act?
"I don't think they [will] get out of the gate on those claims," said intellectual property lawyer Denise Howell, "given that Apple has no monopoly in the cell phone business (indeed, this is its first foray), and AT&T similarly has none when it comes to cell service."
The suit also asserts that unlocking cell phones is an activity protected by the Digital Millenium Copyright Act, which provides an exemption for "the sole purpose of permitting owners of cellular phone handsets to switch their handsets to a different network." That exemption protects users from civil or criminal lawsuits but it does not provide protection from a company disabling their hacks, as Apple did here.
"The plaintiffs are trying to suggest there is an antitrust policy underlying the exemption -- i.e., fostering competition -- but that's at best an implication," Howell said. "It would be difficult if not impossible to prove that the purpose of Apple's firmware updates is to thwart the DMCA exemption," she added.
However, she noted, it is conceivable that a plaintiff could get lucky in discovery and "unearth the smoking gun that shows an update was targeted at and designed to brick unlocked phones." The odds of hitting that home run, she said, are "a long shot."
The suit alleges that the agreement between Apple and AT&T involves an illegal "tying" of two products or services. By installing software locks on the iPhone, Apple "substantially
lessens competition and tends to create a monopoly in the trade and commerce of the iPhone and AT&T's cell phone service," the complaint says.
In arguing that the AT&T/Apple deal constitutes a substantial restraint of trade, the plaintiff points out that under the agreement, Apple is restrained for some time from developing a version of the iPhone that works on faster G3 networks, which use CDMA technology.
"The restraint on Apple's development of the iPhone for CDMA networks is
significant because AT&T's rivals use CDMA technology," the suit says.
Image credit: Product shots by Apple; Artist's concept.