Attempts by the music and movie industries to clamp down on internet piracy suffered a major blow after a US court ruled that file-sharing networks are not breaking the law.

A lawsuit filed by seven leading film studios and the top record labels sought to have Morpheus and Grokster shut down, following a successful assault two years ago on Napster, the original song-swapping website.

To the industry’s irritation, the judge ruled that the new generation of file-sharing companies should not be held responsible for the actions of some of their customers.

Judge Sidney Thomas noted that Morpheus and Grokster do not advocate the theft of copyrighted material.

“The technology has numerous other uses, significantly reducing the distribution costs of public domain and permissively shared art and speech,” he said.

The Recording Industry Association of America and the Motion Picture Association of America were yesterday considering whether to make an appeal to the US Supreme Court.

Jack Valenti, MPAA president, said: “We will continue to pursue all avenues in our power to fight those who illicitly profit from our members’ valuable property.”

Mitch Bainwol, RIAA chief executive, said: “This decision does nothing to absolve these businesses from their responsibility as corporate citizens to address the rampant illegal use of their networks.”

The judge compared the entertainment industry’s stance on this issue to the Betamax case of years ago, when TV viewers won the right to record shows at home. At the time, it was claimed that this would devastate video sales. In fact, sales soared.

Judge Thomas said: “The introduction of new technology is always disruptive to old markets,” arguing that “time and market forces” are the best remedies to the problem of internet piracy.

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