First introduced in 1887, Holmes entered the public domain in Britain years ago.
The literary icon has been kept alive in the public imagination with the help of scores of films -- including a recent series starring Robert Downey Jr. -- and popular television shows like the BBC's Sherlock and CBS's Elementary.
But a quirk in US copyright law which protected ten short stories in the vast Holmes canon had allowed the descendants of author Arthur Conan Doyle to retain intellectual property rights in the United States.
Judge Ruben Castillo rejected the estate's claim that since Holmes and his partner Watson were "continually developed" the copyright protecting the final ten stories should extend to the characters themselves.
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"The effect of adopting Conan Doyle's position would be to extend impermissibly the copyright of certain character elements of Holmes and Watson beyond their statutory period," Castillo, chief justice of the northern district of Illinois, wrote in a 22-page opinion issued Monday.
Holmes scholar Leslie Klinger, who challenged the estate, celebrated the ruling.
"Sherlock Holmes belongs to the world," Klinger said in a statement posted on his "Free Sherlock" website today.
"People want to celebrate Holmes and Watson. Now they can do so without fear of suppression by Conan Doyle's heirs.