U.S. phone unlocking services face the biggest legal risk from mobile operators keen to enforce a change in copyright law that now makes it illegal to modify a mobile device to work on another network, according to the Electronic Frontier Foundation (EFF).
Unlocking a phone was legal until Saturday under an exemption to Digital Millennium Copyright Act (DMCA), which was granted by the U.S. Librarian of Congress on the recommendation from the U.S. Copyright Office. The DMCA forbids consumers from trying to break security controls intended to thwart piracy and copyright violations.
Every three years, the U.S. Librarian of Congress can grant exemptions from the DMCA if it determines users are adversely affected by certain non-infringing uses. In 2006 and 2010, it granted exemptions that allowed users to legally unlock their phones, but reversed its decision last year.
A large U.S. industry group, The Wireless Association (CTIA), opposed extending the exemption, arguing that it fueled a brisk trade in pre-paid phones that are then unlocked and sold in markets where carriers don't subsidize handsets.
The EFF said on Monday on its blog that individual users probably do not face a risk of legal action from federal prosecutors and operators, but instead businesses that offer unlocking services will. Without the exemption, the law would also apply to phones that are not under contract.
If a carrier successfully sued, a phone unlocking service could face a penalty of US$2,500 per phone in a civil suit or a fine of $500,000 and up to five years in prison in a criminal case where it has been determined the unlocking was performed for "commercial advantage," the EFF said.
The EFF said the change in the law illustrates broad flaws in U.S. copyright law and how it is administered.
"The exemptions created by the Copyright Office can be helpful but, as this episode shows, they are too narrow and too brief," wrote Mitch Stoltz, an EFF staff attorney. "They also turn a small, specialized federal office into a sort of Technology Regulation Bureau.
"It's absurd that this small group of copyright lawyers and librarians is tasked with making decisions about the future of electronics markets," Stoltz wrote.
Jailbreaking, or modifying a phone's software in order to install different applications or other customizations, is still legal through 2015. The Librarian of Congress opted to extend that exemption. But jailbreaking an iPad or other tablets is illegal.
Stoltz argued the exemption process needs to be fixed and the anti-circumvention provisions of the DMCA need to be re-evaluated.
"Creating and defending the next round of exemptions will start in late 2014," Stoltz wrote. "If lawsuits happen, the courts should recognize that the DMCA is being misused, and refuse to apply it to anti-competitive software locks."
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