Sony has blinked and dropped its lawsuit against GeoHot, aka George Hotz, a 21 year old hacker whose exploits expanded the use of Sony's Playstation 3 but also allowed pirated games to be played on it.

In exchange for dropping the lawsuit, GeoHot had to agree to not do on the Playstation 3 what is legal to do on smartphones such as the iPhone – jailbreaking it or distributing tools that will allow others to perform a jailbreak. A jailbroken device by-passes any authentication controls the a device maker has put in place to prevent unauthorised programs from being used.

Hotz was accused of violating the US's Digital Millennium Copyright Act, after he published software on his Web site in that allows Playstation owners to gain control of their consoles from the firmware on up beyond what Sony has allowed its customers. Although not illegal when performed on smartphones, jailbreaking game consoles is considered a DMCS violation and prosecutors are not required to prove that a sale of the jailbreaking tools took place, only that it had been distributed.

The tools found in Hotz's Web site gave Playstation 3 owners the ability to run home-brewed software or alternative operating systems like Linux. Of course that meant that they could also play pirated copies of games.