SAN FRANCISCO (AP) _ In a judicial blow to the entertainment industry, a federal appeals court ruled that makers of two leading file-sharing programs are not legally liable for the songs, movies and other copyright works their users swap online.
The decision is likely to force the industry to take the more costly and less popular route of going directly after file-swappers.
Jack Valenti, president of the Motion Picture Association of America Inc., said his group is reviewing its next step following Thursday's ruling by the 9th U.S. Circuit Court of Appeals in favor of Grokster Ltd. and StreamCast Networks Inc.
Mitch Bainwol, chairman of the Recording Industry Association of America, said the decision begs the question of whether ``digital music will be enjoyed in a fashion that supports the creative process or one that robs it of its future.''
Recording companies already have sued more than 3,400 such users; at least 600 of the cases were eventually settled for roughly $3,000 each.
Thursday's ruling could influence another entertainment industry case, brought in U.S. courts against Australia-based Sharman Networks Ltd., makers of the Kazaa file-swapping program, which averages more users than any other file-sharing software.
Company attorney Rod Dorman said Sharman would seek to have a U.S. court declare Kazaa legal. However, he said it would not directly affect a separate lawsuit against Sharman in Australian courts.
Among other reasons, the three-judge panel unanimously upheld a lower court ruling that dismissed the bulk of the lawsuit brought by movie studios and music labels because Grokster and StreamCast don't have central servers pointing users to copyright material, as the original Napster did.
``In the context of this case, the software design is of great import,'' Judge Sidney R. Thomas wrote.
The panel noted that the software firms simply provide software that lets individual users share information over the Internet, regardless of whether that information was copyrighted.
``History has shown that time and market forces often provide equilibrium in balancing interests, whether the new technology be a player piano, a copier, a tape recorder, a video recorder, a personal computer, a karaoke machine, or an MP3 player,'' Thomas wrote. ``Thus, it is prudent for courts to exercise caution before restructuring liability theories.''
A ruling against the file-sharing services could have made them unavailable for legitimate uses, analogous to banning VCRs to watch a school play because they could also record and play copyright TV shows.
Civil libertarians had also warned that a defeat for Grokster and StreamCast could have forced technology companies such as Microsoft Corp. to delay or kill innovative products that give consumers more control.
Napster was shut down after the 9th Circuit ruled that its centralized servers, which contained directories to thousands of copyright songs, made it legally liable for contributing to copyright infringement.
But in the wake of that ruling, peer-to-peer technology developed, avoiding the need for a central hub and arguably limiting the liability of the companies involved.
Fred von Lohmann, who represented Los Angeles-based StreamCast, said the ruling follows ``the same principle that people who make crowbars are not responsible for the robberies that may be committed with those crowbars.''