Owners of Apple Inc.’s iPhone can unlock the device to use applications not authorized by the company, the U.S. Library of Congress said.

Librarian of Congress James H. Billington added the practice, described in the ruling as “jailbreaking,” to a list of actions that don’t violate copyright protections. The decision affecting iPhones and other smartphones was posted today on the agency’s website.

The library acted as part of a periodic review by its copyright office, called for under a 1998 law, into whether legal uses of technology were being blocked. The ruling was a victory for Apple critics led by the Electronic Frontier Foundation, a San Francisco-based privacy-rights group that petitioned the library.

“Now people can go ahead and fix their phones and jailbreak them so they can run all sorts of different applications,” Corynne McSherry, the group’s senior staff attorney, said in an interview. “They can make full use of the phone they bought without some kind of legal liability hanging over their head.”

Apple has sold almost 60 million iPhones since its 2007 debut. The company’s App Store has more than 225,000 applications available for download. The process for inclusion in the App Store has drawn criticism from some developers whose material was rejected by the company.

The company based in Cupertino, California, says it typically withholds approval of applications because they have technical bugs or contain material such as pornography that the company considers inappropriate.

‘Great Experience’

“Apple’s goal has always been to ensure that our customers have a great experience with their iPhone and we know that jailbreaking can severely degrade the experience,” Natalie Harrison, an Apple spokeswoman, said today in an interview. “As we’ve said before, the vast majority of customers do not jailbreak their iPhones as this can violate the warranty and can cause the iPhone to become unstable and not work reliably.”

The Library of Congress also said in the filing posted today that people don’t violate the law when they circumvent copy protection on DVDs and extract short excerpts to create new, noncommercial works.

The decision “unnecessarily blurs the bright line established” in copyright law against circumventing technical protection measures, said Elizabeth Kaltman, a vice president with the Motion Picture Association of America, in an e-mailed statement. The Washington-based organization represents film studios.

‘Means Nothing’

The ruling affecting iPhones “absolutely means nothing as a practical business matter” in part because it doesn’t require any action by handset makers such as Apple, Motorola Inc. and Nokia Corp., Daniel Ernst, an analyst at Hudson Square Research in New York who doesn’t own Apple shares, said in an interview. The Library of Congress findings don’t affect AT&T Inc., the iPhone’s U.S. carrier, Ernst said.

Apple can update the iPhone’s systems to make it harder for unauthorized applications to work on the device, Ernst said.

Apple may also use other laws to keep iPhones from being modified, said Jason Schultz, co-director of the Samuelson Law Technology and Public Policy Clinic at the University of California, Berkeley.

“Having the copyright office side with the jailbreakers doesn’t look good in court for Apple,” Schultz said in an interview. “They will have to explain why the copyright office is wrong.”

Making Margaritas

Jonathan Handel, an attorney for TroyGould in Los Angeles specializing in entertainment and technology, said the decision could open Apple to lawsuits against its practice of preventing the use of certain software on its devices.

“When someone buys a kitchen blender, they don’t expect it to refuse to make a margarita,” Handel said in an interview. “And when they buy an iPhone, they don’t expect it to not run reasonable software.”

In a filing with the Library of Congress during consideration of the issue, Apple said exempting jailbreaking would “destroy the technological protection of Apple’s key copyrighted computer programs in the iPhone device itself and of copyrighted content owned by Apple that plays on the iPhone.”

Apple fell 66 cents to $259.28 at 4 p.m. New York time in Nasdaq Stock Market composite trading.

To contact the reporters on this story: Todd Shields in Washington at tshields3@bloomberg.net; Adam Satariano in San Francisco at asatariano1@bloomberg.net

Source: http://www.bloomberg.com/news/2010-07-26/apple-iphone-users-have-u-s-blessing-to-jailbreak-add-own-applications.html