Sorry for the confusion, I agree that error message is very confusing in this situation. I believe what’s happening here is the device you’re trying to assign as a factory imp is actually a collaborator’s device, owned by a different account and assigned to a development model in your account.
There are a couple options to resolve this restriction:
A) Either you or the collaborator can delete/remove the device from the current model. Once the the device is unassigned, you will be able to add it as a factory imp in your account (even though the device is still owned by a different account).
B) BlinkUp the device with your own account, thus changing owner of the developer device in your account (assigned devices can be converted into factory imps if they are your own device)
Btw, we are in process of improving all these experiences with v5 api and the correlating new UI. I recommend also playing with those