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TracFone Goes After Prepaid Phone Hackers Citing Trademark Infringement.

MIAMI, February 13, 2009 -- Prepaid phone company TracFone Wireless, Inc. filed a federal trademark infringement case against Idaho hackers who unlock the phones and resell them in still bearing TracFone's trademarks.

TracFone Wireless, Inc. ("TracFone") filed suit in the U.S. District Court for the Southern District of Florida against Blue Ocean Distributing LLC, Midway Distributor LLC, and a host of individuals all located in Idaho.

The complaint alleges the defendants bought prepaid phones, directly or through "strawmen," with the TracFone and/or NET10 logo in bulk from retailers like Wal-Mart, Target, or Sam's Club before removing the copyrighted computer code enabling the phones to be used on TracFone's NET10 wireless sysetm. The hacked phones are then sold as new at a premium while still bearing TracFone's trademarks.

By "hacking" the phones, the phones can be used without loading airtime minutes onto the phone. TracFone cites the loss of the sale of airtime cards as a threat to their business model, which depends upon selling the phones at a loss which is recovered by the sale of airtime cards specifically manufacturered to work with the phone.

TRACFONE is a federally registered trademark and TracFone claims the mark has achieved incontestible status.

By making an unauthorized copy of the source code and then removing the portion of the code requiring the user to buy cell minutes, TracFone argues that the defendants have infringed their registered copyright in the code.

In addition to trademark and copyright infringement, TracFone has also pled claims for breach of contract for violating the "Terms of Use" accompanying every phone. Defendants are alleged to have thrown the Terms of Use away along with the manufacturer's packaging. TracFone has also pled causes of action for unfair competition, circumventing technological measures in violation of 17 U.S.C. 1201, tortious interference, false advertising, civil conspiracy, and unjust enrichment.

TracFone claims to be the largest provider of prepaid wireless telephone services in the United States.