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Is Motorola Trying To Ban Reselling Phones?

from the hopefully-not dept

We've seen video game execs freaking out about the second-hand sales market, and apparently that may be expanding to other arenas. The Register has an unnamed source (so make of that what you will) claiming that Motorola is asking people to sign contracts on a new phone that ban the buyer from reselling the phone to anyone, other than back to the manufacturer. Of course, this is an economically dumb argument. The resale market helps add value to the primary market, and allows the company to charge more for its product initially. As Mathew Ingram points out, some are suggesting that this move would violate the first sale doctrine, though that could depend on a variety of factors. I would imagine that the terms could establish the situation as a "lease" of the phone rather than a purchase, but that might be difficult to get the courts to accept. Also, my understanding of first sale doctrine was that it only applied to intellectual property -- not physical goods, so I'm not sure it would really apply here. Either way, it would seem to be dumb, whether or not it's legal. If you want to decrease interest in your product, adding such a clause seems like a reasonable way to do so.


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  1.  
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    claire rand, Nov 4th, 2008 @ 9:33am

    Setting up for a fall

    of course all this means is people will "loose" the phone or it will be "stolen", they will claim another one on the insurance (or not)* and move on. while selling the phone.

    then a "friend" sells the phone after "finding" it.

    or they phone is simply _given_ to a friend for resale.

    sounds more like an attempt at gaining publicity

    * not sure what "offence" has been committed if they tell the company it was lost, but don't claim on anything.

     

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  2.  
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    Anonymous Coward, Nov 4th, 2008 @ 9:42am

    Re: Setting up for a fall

    Or more likely, people will just stop buying Motorola phones. So Motorola won't have a primary market to worry about, much less a secondary market.

    If a manufacturer is going to try to tell me what I can and cannot do with a product I have legally purchased and own, then you can safely bet the farm that I won't buy that product. If it's the only one on the planet, then I'll just do without. I don't want anything that badly.

     

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  3.  
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    Murdock, Nov 4th, 2008 @ 10:20am

    Its an expensive phone...

    They are trying to make the phone in question, the Aura very, very exclusive. It starts with a $2,000 price tag. That is why they want to minimize the re-sale market. Bad idea? Probably, but I don't expect it to propagate to their $50 handsets either.

     

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  4.  
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    Adam (profile), Nov 4th, 2008 @ 10:29am

    Common 50 years ago.

    National Cash Register (Now NCR) used to offer generous trade-ins on older units so they could destroy them (my brother worked for them then). That might work; but a terms of use that insists on return of the original to buy a new one seems dumber than dumb -- there's no incentive to do so.

     

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  5.  
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    pegr, Nov 4th, 2008 @ 10:34am

    IP vs physical goods

    "Also, my understanding of first sale doctrine was that it only applied to intellectual property -- not physical goods..."

    Actually, it applies only to physical goods, not IP. I can sell you my used CD, but not my iTunes files...

     

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  6.  
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    Dennis Savage, Nov 4th, 2008 @ 10:39am

    re: IP vs physical goods

    I believe pegr is correct. First sale doctrine was originally applied to used books. A curious, thankfully rare, error -- I blame the election.

     

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  7.  
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    another mike, Nov 4th, 2008 @ 10:42am

    motorola banning their market

    i saw this yesterday and said to myself, "i know exactly how Masnick will report this. 'limiting the resale market limits the first sale market.'"
    ah, we know you so well.
    whether you actually sell off your old kit or not, knowing that you can if you want to adds some value to the original purchase. value, not necessarily price, you may be willing to deal on feature set. but hey, if you're lucky you can at least break even on shipping the junk to its new owner.

     

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  8.  
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    hegemon13, Nov 4th, 2008 @ 10:43am

    Re: IP vs physical goods

    Hmm, I would argue whether that was true. Certainly the DRM prevents, or at least makes difficult, the transfer of ownership. But, legally, are you prohibited from doing so?

    If I purchase non-DRMed MP3s, is there a legal barrier that stops me from reselling them, provided I permanently delete them from my own computer?

    Last, I think what Mike is saying is that the first sale doctrine is laid down as a part of copyright law. Therefore, it would have no application to a phone. However, I think that the first sale doctrine is an assumed part of commerce for physical goods.

    As far as the phone being a lease, technology leases do exist. If it is a lease, though, they better be prepared to cover it with a warranty and/or replacement phone for defects throughout that lease period. And, they better be prepared to guarantee a buy-back price after a specified period of time. Otherwise, the "if it looks like a sale and smells like a sale" argument would be tough for them to overcome in court, no matter what they call the transaction.

     

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  9.  
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    Buzz, Nov 4th, 2008 @ 10:44am

    ??????

    When did all this happen? When did businesses stop innovating and stop striving to please customers? When did they start focusing on telling customers how to behave with their products? What's next? Toothbrush vendors tell me I cannot use their products for cleaning bathroom grout instead of my teeth?

     

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  10.  
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    Casey, Nov 4th, 2008 @ 10:57am

    Buzz,

    This all happened...

     

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  11.  
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    chris (profile), Nov 4th, 2008 @ 11:14am

    you miss the point

    moto wants out of the ridiculous exclusive handset market but it can't. so they are destroying the business so they can't default on their exclusive agreements.

    then they can say that it was an "honest mistake".

     

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  12.  
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    Joe, Nov 4th, 2008 @ 11:23am

    huh?

    I don't get why they care. these resold phones typically are on the verge of being obsolete...the buyers would be very unlikely to buy a new fancy phone vs. the used one they may pick up.

    Granted maybe i'm the wrong person to talk to about this. I use phones until they crap about (about 3-4 years depending on the build of the phone)

     

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  13.  
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    Travis, Nov 4th, 2008 @ 11:57am

    unlocked

    I would be surprised if the other manufactures don’t follow in the same foot steps. How else can they stop the “unlocked” market? If they can stop it they can make more lucrative contracts with providers. Example the iphone you can bet they spent huge dollars to be the sole provider over x number of years, but if people can use it on any network the profits drop!

    Remember the customer doesn’t come first the bottom line dose!

     

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  14.  
    identicon
    Travis, Nov 4th, 2008 @ 11:57am

    unlocked

    I would be surprised if the other manufactures don’t follow in the same foot steps. How else can they stop the “unlocked” market? If they can stop it they can make more lucrative contracts with providers. Example the iphone you can bet they spent huge dollars to be the sole provider over x number of years, but if people can use it on any network the profits drop!

    Remember the customer doesn’t come first the bottom line dose!

     

    reply to this | link to this | view in thread ]

  15.  
    identicon
    Jack, Nov 4th, 2008 @ 1:13pm

    Things to ponder?

    Motorola has always produced a quality product. In this day and age with our present economic condition putting restraints on a buyer about reselling a purchased product will only pull market shares away from that company no matter who it is. So if the pending information is true than Motorola maybe performing economic suicide. But I am sure that this has been all played out to maximize profits, so only sales will tell if this is a good decision or a costly endeavor. Will Motorola be able to financially overcome the fallout from this management decision?.

    In the cell phone industry, service providers choose the types of phones that are being used, thus the suppliers also have a controlling interest in this piece of the money pie. This is a very interesting financial endeavor which is taking place. This will also fall over into other markets if successful.

     

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  16.  
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    Anonymous Coward, Nov 4th, 2008 @ 1:43pm

    Re: Re: Setting up for a fall

    Motorolla is a pretty damn big player in the mobile market. Not just for phones either. This will hurt, but not cripple them.

    In short, they can afford to make this dumb mistake.

     

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  17.  
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    Anonymous Coward, Nov 5th, 2008 @ 2:49am

    TechDirt has a good idea regarding structuring it like a lease. Same as a cable box :-D

    Now is the lease free and indefinite aslong as you have the same service plan/carrier, or are you charged a monthly rental fee that your carrier credits out? or when you "buy" the phone its a 2 year lease, and then you must return the phone or face stolen property charges or pay damages (2 year lease or more perhaps) for the phone if you loose it?

     

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  18.  
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    Yeebok (profile), Jan 13th, 2009 @ 11:33pm

    It'll be to stop terrorists

    You know they can use them for explosives .. ? (facetious, of course)

     

    reply to this | link to this | view in thread ]


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