An Australian court this morning delivered a landmark decision on internet file-sharing and copyright which could affect 100 million computer users worldwide and is likely to see major music labels redouble their attack on what they regard as "music piracy".

The Sydney court rules that users of Kazaa, the internet music file-swapping system, breach performers' copyright and it therefore ordered its owners to modify its peer-to-peer, or P2P, software.

The ruling comes, ironically, as Virgin and HMV, in association with Microsoft, have launched their own music download sites, to compete with Apple's iTunes system, in which computer users can buy music on the internet.

The Sydney court case saw record companies suing Kazaa’s Australian owners and developers, Sharman Networks, claiming that the website had cost them millions in lost sales.

The music industry told the court that Sharman Network licensed users to access a network it knew was being used for piracy and hence it was authorising people to infringe copyright.

Sharman Networks defended the use of the internet to download music tracks, but said it could not control the actions of its users.

The decision stopped short of ordering Sharman Networks to shut the system down. But it did order changes to the software.

"The respondents authorised users to infringe the applicants’ copyright in their sound recordings," Federal Court Judge Murray Wilcox said.

Sharman has said it will appeal the ruling.

Five record labels -- Universal, EMI, Sony BMG, Warner and Festival Mushroom -- has taken the action. "The Kazaa system is an engine of copyright piracy to a degree of magnitude never before seen," a lawyer for the labels, Tony Bannon, said when the trial opened last November.

"This ruling has implications for organisations across the world," Mark Herbert, the founder of intY, a provider of secure managed internet and e-mail services, told Times Online.

"It highlights that businesses must ensure they not only have a strict policy for what their employees can and can’t access on the internet while at work but also a means of enforcing this. With the increasing level of investigation and prosecution in peer-to-peer file-sharing, any business that sticks its head in the sand and does nothing to stop employees using file-sharing software at work could open themselves up to legal proceedings and company directors may find themselves facing prosecution.

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