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.

Filed Under: economics, first sale, phones, resale
Companies: motorola


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  1. identicon
    hegemon13, 4 Nov 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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