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Is Unlocking Apple's iPhone Legal?
Posted August 27, 2007
Is Unlocking Apple's iPhone Legal?
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By Richard Koman. Updated August 27, 2007 11:08AM

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The battle of the iPhone hackers erupted over the weekend, after teenager George Holz released a YouTube video showing his iPhone connecting to the T-Mobile network. Apple's iPhones come locked so they only operate with AT&T's network.

Holz, who is a freshman at the Rochester Institute of Technology, said his method involves a substantial amount of soldering and risks making the phone entirely inoperable.

Following Holz's announcement on Friday, several other groups announced software hacks, with iPhoneSimFree advertising "the worlds first (and only) software driven SIM unlocking service for the iPhone."

Software Hack Verified

The Engadget blog posted a story Friday confirming that the iPhoneSimFree hack works. Ryan Block wrote that "we can confirm with 100 percent certainty that iPhoneSIMfree.com's software solution completely SIM unlocks the iPhone, is restore-resistant, and should make the iPhone fully functional for users outside of the U.S."

Block said that while it's still possible that Apple might be able to disable the hack with an upgrade, he was able to do a restore on the unit and then replace an inactive AT&T SIM card with one from another carrier.

On Saturday, a shadowy group called iPhoneUnlocking issued a statement on its blog, stating that although its "remote software unlocking services" for iPhone is ready, a lawyer claiming to represent AT&T threatened the group with legal action. Until an assessment is made of the potential of legal action, the company said, it is unable to release the unlocking software for sale.

Monday, the group posted a message on its blog requesting the "OMM lawyer" to call back. The reference appears to be to the international law firm of O'Melveny & Meyers, which has offices in Menlo Park; the firm's Web site is omm.com. The firm did not return a call requesting comment.

But Is It Legal?

The legal status of unlocking an iPhone is somewhat murky. The main law in this area is the Digital Millennium Copyright Act, which forbids the circumvention of copy-protection technology. Last year, however, the Copyright Office created an exemption "for the sole purpose of lawfully connecting to a wireless telephone communication network."

That clearly protects people like Holz, who has said his sole interest in the hacking project was to be able to use his iPhone on his family's T-Mobile service.

But the DMCA might not protect groups such as iPhoneSimFree and iPhoneUnlocking, which are planning to sell their hack software for profit. Writing on the Engadget blog, copyright attorney Nilay Patel said that AT&T or Apple might opt to sue on other grounds.

"It's most likely not legal to unlock iPhones and sell them on eBay, because your 'sole purpose' wouldn't be to connect to a cell network -- it would be to profit from the sale of unlocked phones," he wrote. Case in point: TracFone has been getting settlements from resellers who have been unlocking their phones and reselling them, Patel said.

TracFone Settlements

Intellectual property attorney Denise Howell agreed with Patel, noting in an e-mail, "There's a reason the TracFone cases have been settling: Namely, an unlocking business arguably goes beyond the 'sole purpose' language of the exemption."

Another sticking point is that the Copyright Office exemptions are only effective for a few years. Thus, even if the software sales were deemed to fall within the exemption, "it might only be legal for the term of the exemption," Howell noted.

Holz himself had listed his hacked iPhone on eBay and finally found -- among dozens of fake bids -- an offer he wanted to take. Terry Daidone, founder of cell phone refurbishing company CertiCell, offered Holz a Nissan 350Z Roadster in exchange for the phone. "It's the car the bad guy in the movie 'Fast and Furious 3' drives," Holz told the New York Daily News.

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