Sounds like Tower Hobbies is the problem here, not Phoenix. I'm actually surprised, I thought Tower Hobbies was a reputable business, but refusing to take a return on a defective item they sold me would convince me not buy from them again. That's the whole point of buying from reputable businesses instead of just buying from the cheapest place.

I agree that it was reasonable for Phoenix to ask you to ship your defective dongle to them first. They didn't sell it to you, so they have no way of knowing whether you even actually own a copy, or just downloaded Phoenix from somewhere, without you sending them your existing dongle.