Point of fact, the Other OS was removed BEFORE anything ever usable for illegal activity came from the hack.
I'm sorry, but you are wrong. If you think no one was exploiting the system with it prior to the "official" blog entries from Geohot, you are grossly mistaken. Not only that, but it's rather absurd to think Sony wasn't well aware of the vulnerability, and when it became clear that it was going to open a floodgate of piracy they would want to shut it down... if anything they were too late.
And adding to what Famine said, in the UK a product has to function as advertised (even if its a function only mentioned in the manual) for a reasonable amount of time after purchase. People actually got partial refunds off retailers in the UK (I think £80-£100 for the loss of the feature) and that is also a fact. So I understand the law fine thank you.
Except you stated Sony stole the feature, and obviously implied they broke the law. Instead, it appears that they did neither, and that while Sony has the right to remove any feature, users in the UK at least also have the right to then get some kind of refund. That's far cry from saying Sony stole the feature away from users.
Piracy was rampant on the PS2 for 10 years and it went on to be the best selling console of all time and one of Sony's most successful money spinners. Microsoft actually does the least about hacks and they are enjoying huge success with the 360.
Heavy handedness usually has the opposite effect and now Sony are paying the price for going OTT with the lawsuit. They even wanted to subpoena the accounts of people watching his YouTube video... I'm mean seriously
This is a very common excuse (like the one claiming they would never have bought it any way) used by people who support piracy and often get their games, movies, and music free from illegal means. The fact is someone has to pay for it, and those that do often pay more to make up for the ones who are effectively "stealing" it.
Ask yourself this, if its OK to exploit a system in order to get free games, movies, music, etc, and if everyone does it, who is going to pay to make all the content in the first place?
Ask yourself, what gives them a right to enjoy all the games, movies, music they want for free, but honest consumers have to pay for them?
Sure, it's easy to turn a blind eye on piracy, but if everyone did it, there would be little to no interest in making those same games and movies. And just because not everyone does it doesn't means it's OK.