Federal regulators lifted a cloud of uncertainty when they announced it was lawful to hack or "jailbreak" an iPhone, declaring Monday there was "no basis for copyright law to assist Apple in protecting its restrictive business model."

Jailbreaking is hacking the phone's OS to allow consumers to run any app on the phone they choose, including applications not authorized by Apple.

The Electronic Frontier Foundation asked regulators 19 months ago to add jailbreaking to a list of explicit exemptions to the Digital Millennium Copyright Act's anti-circumvention provisions.

At stake for Apple is the very closed business model the company has enjoyed since 2007, when the iPhone debuted. Apple says it's unlawful to jailbreak, (.pdf) but has not taken legal action against the millions who have jailbroken their phones and used the underground app store Cydia.

View more

Apple maintains that its closed marketplace is what made the success of the iPhone possible, and sold more than three billion apps. Apple alsotold regulators that the nation's cellphone networks could suffer "potentially catastrophic" cyberattacks by iPhone-wielding hackers at home and abroad (.pdf) if iPhone owners are permitted to legally jailbreak their shiny wireless devices.

Every three years, the Librarian of Congress and the Copyright Office entertain proposed exemptions to the DMCA, passed in 1998. The act forbids circumventing encryption technology to copy or modify copyrighted works. In this instance, Apple claimed the DMCA protects the copyrighted encryption built into the bootloader that starts up the iPhone OS operating system.

But the Copyright Office concluded that, "while a copyright owner might try to restrict the programs that can be run on a particular operating system, copyright law is not the vehicle for imposition of such restrictions."

A federal appeals court came to the same conclusion last week in an unrelated dispute about "dongles," or keys that grant access to software. "The owner's technological measure must protect the copyrighted material against an infringement of a right that the Copyright Act protects, not from mere use or viewing," (.pdf) the 5th U.S. Circuit Court of Appeals ruled in a case concerning a software licensing flap between MGE UPS Systems and GE Consumer and Industrial.

Jay Freeman, who runs Cydia, said about nine million iPhones have his alternative marketplace installed on their phones. "If there was something on the books that jailbreaking was not exempt, that would be painful," Freeman said. The Dev-Team, one of the main groups offering free iPhone hacks, declared Monday's development as "fantastic news."

Mario Ciabarra, chief technical officer of Rock Your Phone, which sells an application to turn an iPhone into a Wi-Fi hotspot, said the the Copyright Office's decision is a "big win for consumers and applications developers" and has given the jailbreak community "the legitimacy it deserves."

Apple told regulators that modifying the iPhone operating system leads to the creation of an infringing derivative work that is protected by copyright law. The Cupertino-based computer maker also claimed that the license on the operating system forbids software modification.

Monday's decision, (.pdf) which applies to all mobile smart phones and not the iPad, does not require Apple or other handset makers to allow jailbreaking. Instead, it makes it lawful to circumvent controls designed to block jailbreaking.

In an April security bulletin, Apple said “Unauthorized modification of iPhone OS has been a major source of instability, disruption of services, and other issues.”

The EFF contended that the iPhone's embedded protection system was implemented by Apple as a business decision to prevent competition and is unrelated to copyright interests.

Jailbreaking, the EFF maintained, constitutes fair use of the firmware tied to the operating system.

Regulators agreed, declaring Monday that "the activity of an iPhone owner who modifies his or her iPhone's firmware/operating system in order to make it interoperable with an application that Apple has not approved, but that the iPhone owner wishes to run on the iPhone, fits comfortably within the four corners of fair use."

Apple spokeswoman Natalie Kerris said Apple won't change its policy that voids iPhone warranties if a phone has been jailbroken. "It can violate the warranty and cause the iPhone to become unstable and not work reliably," she said.

Here is a how-to and legal primer on the issue.

Other exemptions to the DMCA announced Monday include:

*allow the unlocking of mobile phones to change carriers.

*allow the cracking of video game digital rights management controls to probe security flaws.

*allow the breaking of DVD encryption by professors, students and documentary makers so the clips can be used for education and commentary.

*allow the blind to circumvent locks on e-books to enable read-aloud features.

*allow the bypassing of broken or irreplaceable dongles.

Last updated at 2:15 p.m. eastern.

Photo: Patrick H. Lauke

See Also: