A US appeals court upheld an order that effectively shut down the Aimster Inc Internet-music swapping service in a ruling that boosts the recording industry's efforts to fight music piracy.
Aimster, which last year changed its name to Madster.com, was ordered by a federal judge in Chicago to halt illegal song swaps while defending itself against suits by the Recording Industry Association of America.
The 7th US Circuit Court of Appeals on Monday upheld that ruling, saying Aimster hadn't been able to show instances where its service was used for lawful means rather than the illegal trade of copyrighted works.
"Far from doing anything to discourage repeat infringers of the plaintiffs' copyrights, Aimster invited them to do so, showed them how they could do so with ease using its system and by teaching its users how to encrypt their unlawful distribution of copyrighted materials, disabled itself from doing anything to prevent infringement," the three-judge panel wrote.
The music industry blames online music piracy as one reason for drops in sales at music companies such as EMI Group Plc.
Companies such as Vivendi Universal SA, Bertelsmann AG and Sony Corp have shut down Napster Inc and are in legal battles with other file-sharing services including Morpheus, Grokster and Kazaa.
The Chicago-based 7th Circuit said the recording industry demonstrated it was likely to win the lawsuit, and that any financial damage to Aimster was outweighed by the irreparable harm the music industry would suffer if the service was allowed to continue.
Recording Industry group president Cary Sherman said in a statement that he was "delighted."
He said that the ruling disputes arguments that Aimster's peer-to-peer network technology reduced the company's liability for the actions of the service's users.
"A peer-to-peer service is not off the hook simply because it claims there may be legitimate uses of its network," Sherman said.
"When these types of services exist primarily as a vehicle for copyright infringement, they have an obligation to try and reduce the illegal activity occurring on their networks," he said.
A federal judge in Los Angeles in April said peer-to-peer file-sharing sites are different than Napster because they permit trades without using a centralized server. On peer-to-peer networks, data is kept on the sender's personal computer.
The contrary rulings increase the odds that the US Supreme Court will have to decide how to deal with the dispute.
Fred von Lohmann, a senior staff attorney for the online advocacy group Electronic Frontier Foundation, said the ruling sets up a battle between entertainment companies and those who make the devices and could, under the 7th Circuit ruling, be required to show that it would have been too expensive to make the products differently.
The judges "made a number of errors that are going to bear bitter fruit for technology companies," von Lohmann said. "I'm not surprised at the outcome of the ruling, but I am surprised at the unnecessary breadth of the opinion."
The appeals court described the users of services such as Aimster as "swappers, who are ignorant or more commonly disdainful of copyright and in any event discount the likelihood of being sued or prosecuted for copy-right infringement."
Those who "facilitate their infringement" may be liable to copyright owners, the court said.