People are "jailbreaking" these phones.
That's a hacker term for cracking the restrictions of software so the iPhone will work on other wireless carriers and allow any apps to be installed, not just those approved by Apple.
Apple is crying foul and asking the federal government for help.
AT&T, recently rated the worst carrier by Consumer Reports, is currently the only carrier for iPhones.
Verizon will begin carrying them next month.
Hacker Nadair Jackson says people pay him $15 to unlock their iPhones to get more apps, and to get them for free.
"You can download themes, new messaging programs and software, and pretty much anything else that Apple doesn't have in the app store. All these things you can get; apps, books, carrier bundles, education, education, games," he says.
Apple is fighting the practice, telling the U.S. Copyright Office:
"Current jailbreak technologies now in widespread use utilize unauthorized modifications to the copyrighted bootloader and operating system, resulting in the infringement of the copyrights in those programs."
Jackson, a community college student planning a career in law enforcement, doesn't believe he's doing anything wrong.
"Apple still gets their money," he says. "If people want AT&T they'll switch to it. Either way people are going to get their phone unlocked even if it's not from me. Somebody's going to do it for them."
The same jailbreaking technique won't work with the new Verizon iPhone because it uses a different transmission technology.