After a legal tussle between Leslie Klinger, a lawyer, and the estate of Edinburgh-born Conan Doyle, Judge Ruben Castillo, a district judge, said that while some stories and plotlines about the detective are still protected by copyright, the character is not.
The decision - which applies in the US - could lead to a rash of new films and TV shows with the famous detective as a key character, after the success of the BBC's Sherlock starring Benedict Cumberbatch and Elementary, a New York based version starring Jonny Lee Miller.
Mr Klinger contended that the Conan Doyle characters were now in the "public domain" and could be used freely. The Doyle estate said that as the character of Holmes evolved over time, it was impossible to dismantle the personality from the stories, 10 of which remain in legal copyright in the US.
The US copyright term is the life of the author (who died in 1930) plus 70 years, or 95 years after publication.
To deny the estate copyright on the whole character, it was argued, would be to give the detective "multiple personalities."
"It is a bedrock principle of copyright that 'once work enters the public domain it cannot be appropriated as private (intellectual) property,' and even the most creative of legal theories cannot trump this tenet," wrote the judge.
The Conan Doyle estate is expected to appeal but until then unauthorised use of the character is legal.