The 1998 Digital Millennium Copyright Act (“DMCA”) criminalizes electronically decoupling a mobile phone from its contracted service provider, otherwise known as “unlocking”:“No person shall circumvent a technological measure that effectively controls access to a work protected under this title.”

“Section 1201 also makes it illegal to circumvent the access controls on DVDs, e-books and video games to make bootlegged copies for sale on the street or swapping online. It also makes it illegal to manufacture or sell devices whose main purpose is to circumvent the digital locks on copyrighted material.”

The DMCA was enacted to protect, and thereby enable the continued development of, copyrighted and copyrightable advances. The regulations surrounding electronic access to digitally-stored and digitally-created media serve to protect intellectual property in a highly interconnected world from improper use and illegal secondary markets.

Instead it is requiring that we choose between our phones and the freedom to switch to our desired new cellular phone service providers.

—-

In October 2012, the Library of Congress decided against renewing the exception to the DMCA, which allowed for cell phones to be unlocked by persons other than the phone-issuing service provider.

As of January 26 of this year, newly purchased phones may not be legally unlocked by anyone other than the provider.

The texting, tweeting, pinning, and instagramming public did not take the news sitting down. They exercised their e-voice through an online “We The People” Petition to the White House.

The White House responded in a statement by David Edelman, White House Senior Advisor for Internet, Innovation, and Privacy:

Thank you for sharing your views on cell phone unlocking with us through your petition on our We the People platform. …

The White House agrees with the 114,000+ of you who believe that consumers should be able to unlock their cell phones without risking criminal or other penalties. In fact, we believe the same principle should also apply to tablets, which are increasingly similar to smart phones. And if you have paid for your mobile device, and aren’t bound by a service agreement or other obligation, you should be able to use it on another network. It’s common sense, crucial for protecting consumer choice, and important for ensuring we continue to have the vibrant, competitive wireless market that delivers innovative products and solid service to meet consumers’ needs. …

The Obama Administration would support a range of approaches to addressing this issue, including narrow legislative fixes in the telecommunications space that make it clear: neither criminal law nor technological locks should prevent consumers from switching carriers when they are no longer bound by a service agreement or other obligation.

We also believe the Federal Communications Commission (FCC), with its responsibility for promoting mobile competition and innovation, has an important role to play here. FCC Chairman Genachowski today voiced his concern about mobile phone unlocking, and to complement his efforts, NTIA will be formally engaging with the FCC as it addresses this urgent issue.

Finally, we would encourage mobile providers to consider what steps they as businesses can take to ensure that their customers can fully reap the benefits and features they expect when purchasing their devices.

We look forward to continuing to work with Congress, the wireless and mobile phone industries, and most importantly you — the everyday consumers who stand to benefit from this greater flexibility — to ensure our laws keep pace with changing technology, protect the economic competitiveness that has led to such innovation in this space, and offer consumers the flexibility and freedoms they deserve.

In a similarly staunch yet meaningless statement, the FCC’s Chairman, Julius Genachowski, stated: “From a communications policy perspective, this raises serious competition and innovation concerns, and for wireless consumers, it doesn’t pass the common-sense test… The FCC is examining this issue, looking into whether the agency, wireless providers or others should take action to preserve consumers’ ability to unlock their mobile phones.” To paraphrase his words, “Cell phones are important to the FCC, but it’s not really for our problem. Let the providers and consumers, i.e. the market, take action.” If only Adam Smith’s invisible hand had a cell phone we could call, text, or FaceTime.

—-

But seriously. This is a lot of ruckus about nothing. The FCC’s response was lackluster because that is all that was necessary. Market forces take care of pricing and demand concerns.

As hard as it is to believe, there was a time when the service, and not the phone itself, was of supreme importance. Originally, home telephones were owned by Bell Telephone Company and leased to the lucky (and affluent) homeowners who could afford them. Cellular phones were clunky and expensive. Phones became cheaper and somewhat commoditized. Then, to allow service providers and hardware manufacturers to differentiate themselves, glitzier phones were made. Then, phones with data. But, by this point, cellular phones became a staple, but computing handheld devices were quite expensive. To incentivize purchases, service providers discounted the manufacturers’ price and the iPhone generation was born. Now consumers want to own the phones – which they purchased at a discount because of the attached strings – outright.

Presidential intervention in this war for “freedom to get free stuff” is ridiculous and potentially counterproductive. If you would like to own your phone – or anything else for that matter – outright, then buy it outright.

Edelman wrote, “if you have paid for your mobile device, and aren’t bound by a service agreement or other obligation, you should be able to use it on another network.” But that is precisely the issue. Purchasers of heavily discounted cellular phones are bound by another obligation. Unlocked phones are available directly from both the manufacturers and service providers at the retail price. By purchasing them through a contract plan, consumers agree to be bound to that provider, although both Verizon Wireless and AT&T Wireless have expressed their willingness to unlock phones and discharge the consumers from this “other obligation” at the end of the contract term.

The present situation is materially different from one in which unlocked phones could not be obtained and where all phones were necessarily bound to one provider. Consumers may choose to contract (or not) with any service provider they so choose, including discount providers which incentivize or require the consumer to bring his or her own device. Consumers cannot have their cake and eat it too, getting both the benefit of discounted phones provided by larger service providers to incentivize consumers to choose their service and the benefit of discounted service providers.

I cannot imagine what the People will want next.

Disclaimer: The opinions espoused are for the purposes of argument only. The author does not endorse any statements texted, tweeted, posted, or blogged in this article.

Last week, Amazon and Overstock.com challenged a New York state law requiring the collection and payment of sales tax on all online transactions for which a New York-based entity “directly or indirectly refer[ed the] customers.” States have the authority to tax sales that occur within their borders. However, “virtual presence” has blurred state lines and created a valuable, tax-free e-commerce market.

In the 1992 decision in Quill Corp. v. North Dakota, the Supreme Court held that retailers who do not operate within a particular state need not collect sales taxes on sales to buyers in that state. New York, however, has tried to skirt the issue by defining the Supreme Court’s “nexus” requirement as one satisfied by the presence of third-party referrers, an action Amazon and Overstock dub unconstitutional. Only time will tell if New York has gone too far.

Standards-Essential Patents: Court-Mandated “Sharing” of Intellectual Property Rights

Last Friday, ITC’s (U.S. International Trade Commission) Administrative Law Judge Pender dismissed one of Nokia’s patent infringement claims against HTC, holding that the patent was “standards-essential” and, therefore, must be available to other companies on a fair, reasonable, and nondiscriminatory (FRAND) basis.

U.S. Patent No. 7,366,529 grants Nokia the exclusive (not so much anymore) rights to the use of a “communication network terminal supporting a plurality of applications.” Basically, the patent claims a method for synthesizing information for the performance of multiple applications and effectively transmitting them for use on a smartphone. Judge to Nokia: It is your property. But they get to have it too. At a “fair, reasonable, and nondiscriminatory” price.

Life, Liberty, and Tax-Free Internet Access

In difficult economy times, Senators Ayotte (N.H.) and Heller (Nev.) look to protect the Internet from government opportunism. The surge of Internet communication has resulted in a significant hit to the U.S. Postal Service, causing the Postal Service to max out its available credit of $15 billion in loans from the U.S. Treasury, and the Internet has been eyed at all levels of government as a lucrative, potential revenue source.

In 1998, Congress passed the Internet Tax Freedom Act, which barred all levels of government from taxing the use of e-mail and various other forms of Internet access and usage. The current Act is due to expire near the end of 2014. Ayotte and Heller hope to extend the ban on Internet taxation indefinitely in an act they claim will “provide certainty to the marketplace, helping the Internet continue to be a driving force for jobs and growth.” “In this world nothing can be said to be certain, except death and taxes.” But then again, Benjamin Franklin did not have the Internet.

Illegal Spammers Migrate to Legal Alternatives for the Lower Pricetag

Spamming has become a serious problem ever since the ubiquitization of the Internet and cheap, almost-zero-marginal-cost modes of communication. The never-ending deluge of legal and governmental attacks, constantly reengineered mail filters, and sophisticated Internet security measures have failed to quash, or even successfully temper, mailbox inundations. However, the almighty dollar has significantly ameliorated the spamming problem.

With the overwhelming popularity of Facebook and similar social networking sites, it has become more cost-effective for would-be-spammers to buy banner space than to pursue their more sordid alternatives. Depending on the selected “universe” to which one’s advertisement is posted, side-of-the-page Facebook ads cost only pennies per click.

Never underestimate the power of a dollar.

Embroiled in a never-ending litany of litigation over patents protecting their smartphone design, Apple ended a potential dispute over its iOS 6 clock design almost as quietly as it arose. A few weeks ago, SBB “politely complained” to Apple about the infringing use of its trademark-protected clock. On Friday, Apple negotiated a confidential licensing agreement with SBB, a Swiss railway operator, for use of SBB’s signature clock design.

SBB’s iconic clock has graced the Zurich train station since 1944. The iOS design copied the clock’s readily identifiable features – black hour and minute hands and it thin red seconds hand with a large red bulb at the end. Thanks to the newly executed licensing agreement, every iOS 6 user can keep time with the same precision, or at least by the same aesthetic face, as the Swiss.

Cyber World with Real Life Consequences

Free speech faces heightened obstacles when it comes to Internet and social network blogging. The technology-induced feeling of security and anonymity fosters more vocal, animated, and irate speech. And it comes with a paper-trail available to unintended audiences.

Last week, one man learned this the hard way. In District Court for the District of Indiana, Judge Lawrence ruled that the People’s case against Mathew Michael would go forward. Mr. Michael is accused of posting threats against unspecified DEA agents. His rantings appear more akin to a disgruntled citizen spewing severe language for its entertainment and attention value than a man who intended to threaten any federal agent, specifically identified or as part of a group. However, he crossed the line and the nation will be watching as this case unfolds. Judge Lawrence wrote: “Certain categories of speech having little or no social value are not protected…” Social media posts are not insulated from that rule.

European Regulators Put Pressure on Google

Google’s recent privacy campaign, meant to educate users as to how personal data is shared and to share data across affiliated sites, has sparked collective European concern. In a letter signed by all 27 European Union member countries, European regulators expressed concern over the methods and scope by which Google shares private user data. The letter highlights the issues of confusion over how data is shared and how users may “opt out” of Google’s data collection program.

Reading is Now Fun (And More Affordable)

Some Amazon and Apple e-book customers have received messages informing them of credits that will be deposited in their accounts towards future book purchases. Qualifying e-book purchases between April 1, 2010 and May 21, 2012 are eligible for a refund as part of a price-fixing settlement agreement. Three published sued by the Department of Justice in April agreed to create a $69 million credits fund and to desist from engaging in any price-fixing scheme.  The settlement agreement is awaiting final court approval in February.

Two additional publishers and Apple have decided not to settle and trial is expected to commence next June.

Their alleged conduct includes price-fixing with Apple to raise the price of e-books, via “agency pricing,” from the $9.99 at which price Amazon had previously forced publishers to sell most books.