T-Mobile Takes Out Some Handset Unlockers

from the the-only-confused-people-here-are-us dept

T-Mobile has won damages and an injunction (via Phone Scoop) against several companies that were taking bulk quantities of its prepaid handsets, unlocking them, and then reselling them. The company calls such activity "prepaid phone trafficking," when it's really just exploiting a poor business model. As in other suits filed by other operators, it sounds like T-Mobile based this one on copyright or trademark claims, saying "Consumers are harmed and may be misled about the source and origin of their mobile phones... Because the phones may still carry T-Mobile's brand, consumers may believe they are purchasing handsets manufactured for T-Mobile and covered by original warranties." That's slightly counter-intuitive: T-Mobile says the unlockers made their money by buying handsets locked to the operator, then unlocking them so they could charge a higher price when they were resold. According to T-Mobile, the phones carried a higher price, weren't sold in original packaging and didn't come with manuals. They were also, presumably, accompanied by advertising playing up the fact that they could be used on any operator's network. All of this combined would seem to make it pretty clear to buyers that they weren't buying an original, "official" T-Mobile product. So where's the basis for the confusion claims?


Reader Comments (rss)

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    Grady, Mar 12th, 2009 @ 11:02am

    So where's the basis for the confusion claims?

    Confusion =

    T-Mobile's lawyers > Company X's lawyers.

    "Lawyers" interchangeable with "bank account".

     

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    Anonymous Coward, Mar 12th, 2009 @ 11:12am

    They might have a claim simply because it still does carry the brand logo. Maybe next time the "trafficker" will just remove the logo somehow.

     

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    Derek Kerton (profile), Mar 12th, 2009 @ 11:37am

    Slapp A Logo On It

    So then if I slap a logo on a product I sell, then no one else can ever re-sell it, right?

     

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    jeadly (profile), Mar 12th, 2009 @ 11:40am

    Analogs?

    Can anyone think of another example where a company upgrades a stock product, perhaps voiding the warranty in the process, and sells the result as a value-added product?

    My mind immediately leapt to RUF and Porsche, but apparently they get unbranded cars from the factory. So its not quite a match for this situation.

    I would imagine these merchants don't market their handsets as 'un-warranteed' in addition to being unlocked, so it may be reasonable for T-mobile to point out that they're not authorized resellers.

     

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      jonnyq, Mar 12th, 2009 @ 12:02pm

      Re: Analogs?

      Game console mods, but those are possibly illegal due to DMCA, but not trademark. Even then, you could mod a game console in a way that has nothing to do with modchips and you'd be fine (think Ben Heck's mods).

      Yeah, cars are another good example. Modded cars often sell for more than the original price.

       

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      Anonymous Coward, Mar 12th, 2009 @ 12:42pm

      Re: Analogs?

      Pontiac Solstice modified with a V8 sold by a 3rd party as the Solstice Hammer.

      AMD modifying Intel processors (this was long ago before AMD manufactured processors them selves)

       

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        Dave, Mar 13th, 2009 @ 7:23am

        Re: Re: Analogs?

        Both of those are done with permission (or at least knowledge) of the original companies and remarked as not the original product.

         

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      some old guy, Mar 12th, 2009 @ 3:13pm

      Re: Analogs?

      Theres a conmpany that buys apple laptops and mods them with a touch screen.

      They are not only sanctioned by apple, apple even gave them free advertising by showing them off at a big apple event.

      Touchbooks? some stupid name like that. Never saw the point myself, but others love them.

       

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    Yakko Warner, Mar 12th, 2009 @ 11:49am

    Confusion?

    As someone who continues to get emails demanding a refund for their Amazon Prime membership fee, wouldn't you be the last to question how people can be confused? ;)

     

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    Derek Kerton (profile), Mar 12th, 2009 @ 12:01pm

    Better Business Model

    Carlo points out that T-Mo have simply offered a bad business model. It's true: if your business model encourages arbitrageurs as much as customers, you need to bo back to the drawing board.

    Now, the goal with prepaid phones is to make the initial price of the phone very cheap, so that, frankly, poor folks can afford one, and then pay you about 30 cents a minute for prepaid phone use (which compares to the ~8cents/minute that high volume post-paid customers pay).

    The notion is to offer a free phone (the first crack hit) and to charge more for subsequent hits (prepay refills). To assure that the phone, which is offered at a substantial discount, is used on T-Mo, they lock it to T-Mo SIM cards.

    It's not a bad or dishonest model, and it has worked for years for razor companies and inkjet printer makers. Often, this is the best option for low-income people who make infrequent calls.

    But by selling a phone at well below market price, they open themselves up to arbitrageurs. Once the phone is unlocked, it is worth more, and thus the arbitrageurs buy low and sell high. But what is wrong with that? T-Mo offers phones for sale, these guys buy them. When the own the phone, they unlock THEIR property, and then they sell their property. Seems like T-MO's problem for selling them too cheaply.

    So, instead of just SIM locking:

    - why not sell them with a signed agreement NOT to unlock it for 24 months - then the arbitrageurs really WOULD be in breach of a contract?

    - Or why not sell it with $50 of T-MO prepaid minutes attached to that unique phone, which may drive up the initial price, but would certainly scare off the arbitrageurs?

    - Or how about leasing the phone so that it remains T-MO property, keeping the effective price low, and retaining legal control of the device?

    There are dozens of business models that would satisfy the target market, but leave little opportunity for the arbitrageurs. It should be T-MO's (and Tracfone, and other pre-paid providers, too) job to solve this, not our court system's. This is like HP whining that people are using non-HP ink in their printers using non-HP ink in their printers...tough luck!

     

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    Shawn, Mar 12th, 2009 @ 12:13pm

    prepaid phone trafficking

    Im not sure why that is supposed bad . . . LOL? (is it the trafficking instead of shipping?). They really need better marketing people, thats not nearly sinister enough sounding.

     

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    TPBer, Mar 12th, 2009 @ 12:24pm

    Unlockers

    You can find plenty of software on the torrent sites to unlock just about any phone, I unlocked a BB Pearl the other day to get it off ATT, it took about 15 minutes to do.

     

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    Amith, Mar 12th, 2009 @ 12:44pm

    So they are prosecuting paying customers ?

    So T-mobile is actually prosecuting people who are placing bulk orders (paying possibly good amount of money) ? Talk abt shooting ones own foot

     

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    porkster, Mar 12th, 2009 @ 12:58pm

    Two wrongs dont make....

    So someone buys something, adds value to it, sells it for a profit... That is bad!!

    And the right to onsell something.. thats bad too!!!

     

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    Lockem In, Mar 13th, 2009 @ 7:36am

    Well BooHoo

    That is a real shame, a company does not like what is done to THEIR product after they have sold it.

    "Consumers are harmed and may be misled about the source and origin of their mobile phones."

    Seems like a stretch

     

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    chris (profile), Mar 13th, 2009 @ 10:10am

    happens all the time

    the sony PsP, the iOpener, 3com audrey, the list goes on and on.

    why not sell the phone either at cost or for a small profit and encourage people to do what they want with the phone once it's theirs?

     

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    chris, Mar 14th, 2009 @ 10:45pm

    How is it noone understands? Amazing!!!

    Idiots!! The product is susidized by T-Mobile for a fraction of it's value for the sole porpose that it is used on their network only with pre-paid cards..Apple or none of the other companies people have given as examples subsize their products like this. There should be something in the paperwork of the product to state this and if there is then they have every right to sue,If not then T-mobile needs to add something to this effect to the product.

    chrissy- I am sure they would sell it at cost if the people that would buy this type of product could afford that easily enough

     

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    Anonymous Coward, Mar 14th, 2009 @ 10:46pm

    purpose too

     

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    Anonymous Coward, Mar 16th, 2009 @ 8:06pm

    They are in 4th place and with less new subscriber signing up for their service, they need to sue someone to get revenue for their company?

     

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