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The legal issues are not as simple outside of Canada.
Yes, it's certainly different in some states. But I think that even if phones had a big red "Push to record" button, that would at least allow users to warn other parties that they want to record the call, at which point they could push the button.
Would the manufacturers still be responsible if the record feature came with big warnings on the phone, along the lines of "By enabling this feature, you agree to follow local and federal laws with regards to wiretapping, including possibly having to notify all parties before recording a conversation"?
Why not follow the Google Voice model and have a key combo that will play a disclaimer to both parties and start recording?
Because it's slow and annoying? Plus you can't push the "4" button during a call without triggering recording, which breaks some phone menus.
I'm not sure that annoyance level is what should matter when we're talking about respecting local privacy laws. Perhaps a better interface can be designed/implemented, but that's another matter.
I think it definitely should matter, when I could always just bypass the entire process with a $10 voice recorder from RadioShack.
In the state in which I live, that's not required, and in most cases would cause the other party to hang up on me.

(I needed to make some phone recordings to keep my landlord honest after they kept refusing to make vital repairs. If they heard a warning about being recorded, they likely would have refused to speak to me on the phone, and I'd probably have had to take them to court. I bypassed the entire issue by calling them on speakerphone next to my computer, while running a sound recorder.)

Maybe yes, maybe no, that'd be something the courts would have to decide, which means a gamble for the manufacturer (with little to no payoff)
What if I'm in Canada and call someone in the US? Which laws apply?

Alternatively, what if I'm in the US, call someone in Canada, and they conference call a 3rd person in the US?

In the US there are one-party states and there are two-party states.

http://www.callcorder.com/phone-recording-law-america.htm

If you call someone in a two-party state from a one party state, as far as I can tell, you are in the clear; some require notification. Arizona is even better as you don't have to be the subscriber in order to record the call. So you can do it from a hone booth, hotel, etc.

If only there were a means or a technology to encapsulate location information in the call itself so the other side can act upon it.
it holds true the law the person doing the recording is in.

unless he used a mechanism provided by a company doing the connection that resides in the US or some other place where it's illegal.

Typically you only need to follow the laws that are applicable in the region you are in. However, there are times where you can be tried for breaking a law in a country you don't reside because you have knowingly and willingly broke that law and tried to get residents of that nation to do the same. The instance of where that happens is Richard O'Dyer (http://www.techdirt.com/articles/20120113/09184917400/us-to-... first link that I found quickly).
Who cares?

last time i checked shooting and/or stabbing someone was illegal. Even in Canada (gasp)

but I don't see anyone stopping the production of guns or kitchen knives.

Why doesn't let us the iPhone block incoming phone numbers? It's rediculous!
"The law, at least in Canada, allows anyone to record a conversation they are apart of without the consent of the other party for their own personal reference, or journalistic purposes."

In my view, the US Federal and State laws on wiretapping are crazy and all over the place.

Things that are illegal for the cops should not be the same as things that are illegal for citizens.

And there seems to be a lot more good reasons to allow citizens to record calls (without notification of the other party) they are part of than there are reasons to disallow them.

Manufacturers about 6+ years ago used to allow this. Almost every Windows Mobile phone I had had the ability to do this with a custom application.

I would suspect the manufacturer wouldn't be liable if you put a disclaimer on it but IANAL. It would sure be nice, however...

I think my old LG VX8700 (from 2007) had this functionality as well. Interestingly, it only recorded the other side of the conversation (not powerful enough to record both phone-in and mic-in at the same time?).

I wonder what caused manufacturers to start removing the feature.

It also presents an interesting case, if the end user had the ability to record calls, would that then cut down on law enforcements need to wiretap calls to get recordings for evidence?

Would this be a reason to rethink anti-recording laws to allow the public to record conversations? I think it's better if the public has the power to decide when their calls are recorded, than the government without our consent.

The MIUI rom for android allows two-way call recording.
Through accessing the audio streams or through the microphone (hearing the earpiece with the mic)? Because last time I checked, only the latter worked on phones from certain manufacturers.
In Germany recording audio or video (without consent of the other party) is illegal and you can even get in jail for this. The reason for it being illegal is because the law wants people to be able to talk to each other without the fear that everything can potentially be recorded. The law argues that this fear would change interpersonal conversations in a wrong way.
I hope that there are exceptions for things like filming in public. You can see how horrid such laws are when the police want to suppress citizen-made films of their actions in the US...
There are exceptions. Recording in public is allowed in some cases. It mainly depends on the number of people who are recorded at the same time. If this number is high enough the restrictions become more relaxed.

And please note that I am only describing the situation in Germany without judging the situation. :-)

Seems to me that a Nokia Series 60 Smartphone that I had did record calls, but it made an annoying beeping sound that both parties could hear every minute or so. The explanation in the manual was that due to the laws in some countries they made the audible beep so the other party would know they are being recorded. It was an interesting way to "solve" this problem that seemed invented by paranoid lawyers but it did make the recording function more or less useless.
I remember a few years back, I was on the phone to a friend of mine a lot and I kept hearing a beep. I asked her what it was, she said she couldn't hear it.

Now I remember she had a Nokia 5800, so someone I don't speak to any more has all logs of our conversations, and I didn't even know until now. That makes me feel very violated in all honesty.

If you didn't say anything wrong, you have nothing to fear, citizen.
I had that same beep on my N95. I worked around it with a script that would start a second overlapping recording, then stop the first recording just before each beep. Then at the end of the call, the script assembled all the (~1 second) audio fragments together, cutting out the overlap.

I blogged about it here: http://mindinthewater.blogspot.com/2008/02/recording-phone-c...

I'm quite annoyed I can't record calls at all on my nexus S these days.

Sony Ericsson's old dumbphones (before they went Android-only) also allowed recording of calls and it'd also play the same beep.

I wonder why both the current (US-based) top smartphones OSes dropped this feature?

If you use Google Voice, you can press "4" to record incoming calls.
From what I understand, it notifies the party that you are trying to record. If you are in a "one party" state, you may not want that. There are some companies that will hang up instantly when hearing that, even when they themselves play a disclaimer that the call may be recorded.
When computers start not doing what we want them to do because of laws... Lookout. Im sorry dave, i won't print that, or copy it, or show it, because a senator's notary is on it, and it may contain corruption or fraud. According to law xyz, this file has been deleted. Please call your local senator to file a complaint.
There are a number of call recorders on Android. I used vRecorder for quite a while. Sometimes (often?) they only record what the microphone hears, so the caller on the line's voice can be pretty low.