When is a Cell Phone Not a Cell Phone?

As I have noted often in the past, IP law sometimes echoes Dr. Seuss. Do we have One Thing or Two Things? Things matter, again. I’m catching up with a district court case from earlier this month, in which the court wrestled with the following argument:

A cell phone is sold to a consumer and “locked” to a given wireless network, in this case, Verizon. The phone is “branded”: Verizon trademarks appear on the handset and on the boot-up screen when the phone is turned on. The phone is then “reflashed” by a different wireless carrier, in this case MetroPCS, meaning that the new carrier reprograms the phone, at the request of a consumer, to access the MetroPCS network. (Rebecca Tushnet describes the facts of this case in much more detail.)

MetroPCS sued Verizon for a declaratory judgment of noninfringement; Verizon counterclaimed on a variety of theories, including trademark infringement. The parties filed cross motions for partial summary judgment, which the court granted in part and denied in part.

The part that interests me is the following: If MetroPCS modified a “trademarked good,” to borrow the court’s (and the parties’) characterization, then did MetroPCS create “new phones” by “reflashing” them, or did it take existing chattels and modify them at the request of their owners? The former would might lead to trademark infringement liability, if consumers were likely to be confused; the latter likely would not, because MetroPCS would not have used Verizon’s marks in commerce.

Is a “reflashed” handset a new product – a new “thing”? Verizon, relying on the fact that the majority of handsets are sold in a locked state (and that the handset at issue obviously are sold while locked to Verizon), argued that the relevant “product” is the handset/service combination. Metro argued that handsets and wireless service are not one thing, but two.

How to decide this issue? The court considered “industry practice,” “common sense,” and an analogy (are wireless handsets like TVs?). And it punted. Without deciding which evidence mattered, it concluded “that the summary judgment evidence creates a genuine issue of material fact whether reflashing fundamentally transforms a handset so as to create a new product and therefore constitutes “use” of Virgin Mobile’s mark.”

Citation: MetroPCS Wireless, Inc. v. Virgin Mobile USA, L.P., 2009 WL 3075205 (N.D. Tex. Sept. 25, 2009).