A Los Angeles federal judge dismissed a lawsuit against file-sharing services Grokster and StreamCast Networks on Friday (25 April), saying that they can not be held culpable for illegal file trading done over their networks.
The ruling, made by US District Court Judge Stephen Wilson, represents an almost complete turnaround from previous victories the record and film industries have had in cases involving illegal peer-to-peer (P2P) file trading.
The Recording Industry Association of America (RIAA) said it would appeal the ruling immediately.
In his opinion, Wilson ruled that the P2P networks have substantial non-infringing uses in addition to infringing uses that cannot be dismissed.
"It is undisputed that there are substantial non-infringing uses for defendants' software," Wilson wrote, such as distributing movie trailers, free songs and other non-copyright works.
Furthermore, he ruled that the P2P network operators do not have any direct knowledge of when illegal trading is happening on their systems, said Grokster spokesman Wayne Rosso.
While Wilson wrote that "it is undisputed that defendants are generally aware that many of their users employ defendants' software to infringe copyrighted works" he said that direct knowledge of users' infringement could not be proven.
The judge compared the case to the ruling in Universal City Studios' lawsuit against Sony, in which the court said that the sale of video recorders did not subject Sony to contributory copyright liability.
"This is a huge victory for us," Rosso said. "And one of the remarkable things is that this judge showed a rare comprehension of both the technical and legal matters."
The RIAA said it disagreed with the court's decision that the file-swapping services are not liable for the "massive illegal piracy that their systems encourage" and that it would appeal the ruling immediately.
Still, the RIAA said it was not entirely displeased with the ruling. The court affirmed that individual users are accountable for sharing copyright protected material, it said.