iPhone Antitrust Suit Claims Apple’s Carrier Exclusivity Violates DMCA

A new antitrust lawsuit filed on behalf of iPhone users could get rid of Apple’s exclusivity agreements (‘EA’) with AT&T and Verizon.

The class-action lawsuit (below) accuses Apple of violating the Digital Millennium Copyright Act (‘DMCA’) because the EAs do not giving consumers the “absolute legal right to modify their phones to use the network of their carrier of choice.”

If the plaintiffs successfully get a court to let consumers opt-out of carrier EAs, the ripple effect could be be huge. A decision for plaintiffs could potentially affect all carriers and all mobile handsets sold with locked phones with sold with exclusivity agreements in the U.S., regardless of what mobile operating system they use.

The DMCA allegations against Apple are the most intriguing aspect of the case. The complaint asserts that the DMCA gives iPhone users the legal right to unlock their phones and switch to another carrier of their own choosing.

Plaintiffs contend that when DMCA issues were debated, the Register of Copyrights made clear that the mobile phone access controls demanded by telecoms had nothing to do with copyrights. Rather, they “are used by wireless carriers to limit the ability of subscribers to switch to other carriers, a business decision that has nothing whatsoever to do with the interests protected by copyright.”

In 2007, the Librarian of Congress issued a final rule making cell phone access controls exempt from DMCA compliance.

The DMCA exemption protecting consumers, plaintiffs contend, prompted Apple to engage in monopolistic behavior with the iPhone to illegally block consumers from using any phone service of their choice.

“Because Apple was unable to enforce its SIM card Program Locks through legal means, it engaged in a scheme to enforce them unlawfully as to the iPhone.”

The complaint alleges that Apple EAs with AT&T Mobility and Verizon violate the Sherman Act by restraining trade and monopolizing consumers’ options.

The Plaintiffs’ lawyers also maintain that Apple failed to obtain customers’ contractual consent to:

  • Prevent consumers from switching to other carriers during it’s 5-year EA with AT&T;
  • Prevent consumers from using non-AT&T SIM cards; and
  • Not give consumers codes to ‘unlock’ their phones so they could be used with other carriers

The lawsuit also contends that Apple also:

  • Monopolizes the iPhone software application market; and
  • Conspires to monopolize the iPhone voice and data services aftermarket

You can read the complaint in the class-action lawsuit below, and follow developments in the case here using Justia Dockets.

Class-Action Complaint
Pepper, et al. v. Apple, Inc.