The Library of Congress dropped a bombshell today in the form of new exemptions from the DMCA's anti-circumvention provisions.
The biggest splash of all was for smartphones: The Library approved an exemption proposed by the Electronic Frontier Foundation that allows smartphone owners to modify the handset's software to run unauthorized applications.
The basis for this exemption is also interesting. In order to qualify for an exemption, the underlying activity has to be lawful under the Copyright Act. So the question the Library had to answer in considering this proposed exemption was whether the Copyright Act permits a smartphone owner to modify the handset's software to make it compatible with unauthorized applications.
Apple, for one, contended this software modification creates an unauthorized derivative work. The EFF and other commentators suggested this modification is nonetheless permitted because the handset purchaser owns both the handset and the copy of the software installed on the handset, and therefore has the right to modify it under section 117 of the Copyright Act. The Library concluded the state of the "first sale doctrine" is too confused to conclude this is so. Instead, the Library concluded that modifying the handset software for purposes of interoperability is a fair use of the copyrighted software.
This was not an inconsequential decision. Apple fought hard to avoid it and suggested the integrity of the iPhone ecosystem was threatened by it. But in assessing the fair use issue, the Library rejected Apple's arguments and embraced the right to make private, non-commercial modifications to software in order to add functionality and facilitate interoperability, concluding this practice is "innocuous at worst and beneficial at best." The Library went on to conclude there is no basis for Apple to use copyright law to "protect[] its restrictive business model" and the concerns Apple articulated about the integrity of the iPhone's "ecosystem" are simply not harms that would tilt the fair use analysis Apple's way.
While this decision might not stop Apple from disabling iPhones that have been modified, it could help open the door to lawful distribution of programs that open the iPhone OS to applications not authorized by Apple. I imagine Apple is not going to let this go, and the fight between Apple and the jailbreakers is about to get even more more interesting.
You can read more about the Library's decision here, as well as the recommendations supporting it from the Registrar of Copyrights.