Does Apple Policy on iPhone Unlocks Violate Magnuson-Moss Warranty Act?

The iPhone had better be worth it to Apple. With their loyalist-alienating price slash (which one would think has to lower revenues and profits), obstacles to battery replacement, and continuing troubles with AT&T (a botched launch followed by general unhappiness with the carrier), the mixed press about the phone has undermined its “gee whiz” look and feel.

Since AT&T is one of the negatives associated with the phone, geeks have been out to unlock it so it can be used on other carriers (it’s compatible with T-Mobile’s network) or as a Wi-Fi phone. But Apple attempted to block that route today by announcing that unlocking the phone constitutes a warranty violation and that firmware updates on unlocked iPhones may (as in will be designed to) damage them.

The problem is it’s not clear at all that Apple is within its rights in taking this posture. PhoneNews tells us that Apple’s new policy likely violates the Magnuson-Moss Warranty Act. The post is a bit technical, but makes clear that there is a way Apple could stay within the law and achieve their objectives. But having firmware updates damage unlocked phones is clearly not kosher.

From PhoneNews:

The Magnuson-Moss Warranty Act states that Apple cannot void a warranty for a product with third-party enhancements or modifications to their product. The only exception to this rule is if Apple can determine that the modification or enhancement is responsible damaging the product in question….

The legal question is three-fold here: Is the SIM Unlock process that has become mainstream (anySIM/iUnlock, available from our iPhone encyclopedia entry) doing damage to iPhone? And, also, is Apple designing future software updates to do damage to iPhone when said SIM Unlock code is present? Finally, is Apple’s limited warranty setup to prohibit such unlocks, as defined by federal law and the specific terms of the limited warranty itself? ….

First, the status of SIM unlocks in and of themselves. Generally, phone manufacturers consider a phone successfully unlocked to maintain its warranty. A phone that has been unsuccessfully unlocked may lose its warranty if the phone cannot be repaired by re-flashing its firmware.

The SIM unlock process for iPhone relies on making a modification to Apple’s baseband firmware. The baseband firmware is essentially the software that exists on the radio itself. It is independent of the embedded Mac OS X installation….

Does this do damage to iPhone? There is no evidence that it does. The part of the baseband that is modified only controls SIM unlocks. For Apple to void the warranty, they would have to provide clear technical evidence and documentation… something Apple has not yet provided. Until they do, this appears to be an initial violation of Magnuson-Moss. It’s no different from putting a third-party part in a car that does not damage or inhibit any other part of the car. Furthermore, it is valid and has been ruled as not a DMCA violation by the U.S. Copyright Office, so there is no tainted hand argument either.

Apple does, however, have one card in their hand… they can require users that have SIM unlocked their iPhone, to re-lock them. The baseband firmware can be re-flashed and re-locked to AT&T’s network. However, Apple is currently holding that any iPhone that has ever been attempted to unlocked has a voided warranty. In short, if Apple changes that position to simply requiring that the iPhone be re-locked to AT&T, they are back in compliance with the law.

The second question of updates from Apple damaging unlocked iPhones, is much more complicated. If an update can, unintentionally, do damage, is again a question Apple must answer before rendering iPhone’s warranty void. And, Apple is legally required to prove it… at least on the civil grounds of more-likely-than-not. If Apple will release an update that intentionally detects the baseband modification, and then does damage iPhones that have it is more simple to answer; they could, but it’s illegal for them to do so. Magnuson-Moss prevents Apple from intentionally voiding the warranty based on the presence of a modification. Extrapolating from that, it also prevents them from damaging other components of iPhone (such as Boot ROM or baseband components) simply because the modification has been detected (which an updater can detect by checksumming the baseband).

It is questionable if Apple can simply word in their warranty agreement that SIM unlocks are a voiding condition. This would be necessary for Apple to legally void warranties based on a SIM unlock, and under Magnuson-Moss, any term of iPhone’s warranty that does so must be explicit and easy for the consumer to understand. Magnuson-Moss is vague on the implications of such a situation. It would be similar to stating that using a third-party ink jet cartridge voids the warranty of a printer. While Apple makes the statement of “a product or part that has been modified to alter functionality or capability without the written permission of Apple” voids the warranty, SIM unlock processes that are free and openly sourced, are not salient products, nor are they traditionally defined as a part. Furthermore, the SIM unlock can be reversed, and thus is not a permanent modification… in other words, Apple can remove it easily. Furthermore, any iPhones unlocked before said wording would still be entitled to warranty care… and Apple has no way of detecting exactly when an iPhone was unlocked.

The conclusion here is simple: Apple has, at least in a minor and reversible way, violated the Magnuson-Moss Warranty Act. Apple should take action to correct their policy, and require that iPhone customers seeking warranty service, return their iPhone’s to locked condition.

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