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New iPhone lawsuit seeks billions in damages

Apple's claim that unlocking could damage the iPhone was a lie, suit charges

October 11, 2007 12:00 PM ET

Computerworld - A class-action lawsuit targeting Apple Inc. and AT&T Inc., filed last week in federal court, accuses the companies of illegally conspiring to tie iPhone customers to the telecommunications company's wireless network.

The lawsuit (download PDF), which was filed in court in San Francisco the same day another was filed in a Sacramento state court, slaps the two companies with six charges and claims that they broke numerous state and federal laws and regulations. The suit seeks compensation for $1.6 billion in damages, plus punitive and other damages that could push the total to well over $2 billion.

According to lawyers for Paul Holman in Washington state and Lucy Rivello in California, Apple and AT&T conspired to block all modifications of Apple's iPhone to stymie any attempt by a user or competitors to diminish or tap into the Apple-AT&T revenue stream. Specifically, the suit charges that Apple blocked third-party applications, barred any ring tones but those it sold via iTunes, and disabled unlocked phones with last month's Version 1.1.1 update.

Apple updated the iPhone's firmware to 1.1.1 two weeks ago after warning users that the upgrade might "brick," or disable, their devices. Several days before that, Apple claimed that software hacks that unlocked the iPhone could pose a risk. "Apple has discovered that some of the unauthorized unlocking programs available on the Internet may cause irreparable damage to the iPhone's software," the company said in a Sept. 24 warning.

The Holman-Rivello lawsuit asserts that the 1.1.1 update was digital bullying and that the warning of "irreparable damage" to an iPhone by unlocking was a lie. "Apple and AT&T agreed to go beyond these [previous] tactics and to take affirmative steps to break the iPhones of consumers who lawfully unlocked the AT&T SIM card or who installed third-party apps," the suit read.

As to the warning of unlocks doing damage, that was just standard fear, uncertainty and doubt (FUD), the suit claims. "Apple had no reason to believe that statement was true," according to the 24-page filing. "None of [the antiunlock, anti-outside application changes in 1.1.1] were technically required for the purposes of the upgrade but were designed solely to advance Apple's unlawful purposes and conduct, and not due to any 'unavoidable' conflict or damage resulting from third-party apps or SIM unlock procedures."

Like the class-action lawsuit filed in California state court, the federal action seeks damages, although Holman and Rivello's demands are considerably higher, totaling no less than $2.6 billion. The suit also wants the court to void any agreement between Apple and AT&T judged unlawful and to bar the companies from any similar moves in the future.

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