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SONY should win the court case.

 1) Reverse engineering software without permission is illegal.
 2) He is using a number of patents in his custom firmware without permission. Remember all those codec's, the ability to play PS1/PS3/PSN games etc, are all patented -- thus distributing this technology without the patent holders permission is illegal.
 3) Piracy is illegal and GeoHot has been trying to pirate games for a while (yes even before other OS was removed)