On October 5, Paul Holman and Lucy Rivello, both recent purchasers of Apple iPhones, filed suit against Apple and AT&T in the Northern District Court of California, alleging unfair and fraudulent business practices and anti-trust violations under California law, anti-trust violations under U.S. federal law, and trespass against personal property. The plaintiffs also are seeking to represent a nationwide class of similarly situated iPhone owners, dating from June 29, 2007, to the future date of judgment.
The plaintiffs’ allegations arise from their experience with the mobile network “locking” practices employed by Apple and AT&T with respect to the iPhone. Ordinarily, mobile network carriers can provide electronic codes to “unlock” a particular phone from their own network, thereby allowing the phone to access another carrier’s network that uses a compatible technical standard. While a carrier may charge an early termination fee before it allows a current customer to switch to another network, if that customer is under no pending contractual obligations with the carrier, the carrier usually will comply with the customer’s request and unlock the phone.
In the case of the iPhone, however, even though customers in most cases paid full retail price for their iPhones and may be under no contractual obligation to remain with AT&T, AT&T has refused to allow iPhone owners to unlock their phones and migrate to another compatible network. Moreover, according to the complaint, customers who have attempted to unlock their phones without assistance from AT&T have had their phones re-locked or even permanently disabled following a “mandatory” update to their devices’ operating systems from Apple. The complaint further alleges that when the affected customers have requested that Apple reactivate their disabled iPhones, Apple has refused, has told them that they are in violation of applicable iPhone user agreements, and has stated that the only recourse is to purchase a new iPhone.
As this case develops, it will be interesting to see how well the iPhone user agreement fares under scrutiny, as it is the document around which all of the claims and defenses in the case apparently will revolve. A negative result for Apple and AT&T could have important consequences for user agreements in other contexts.
You can download a copy of the complaint here