Federal Court Judge Murray Wilcox ruled that Kazaa's Australian owner and developer, Sharman Networks, had not itself breached copyright but had encouraged millions of Kazaa users worldwide to do so.
"The respondents have long known that the Kazaa system is widely used for the sharing of copyright files," said Wilcox in his ruling in a Sydney court.
The decision follows a similar judgment in June in which the U.S. Supreme Court ruled that file-sharing networks such as Grokster can be held liable if their intent is to promote copyright infringement of music or movies.
"The message is very clear for P2P services: It's time to go legal," said John Malcolm, chief executive of the International Federation of the Phonographic Industry (IFPI). "Today's judgment shows that Kazaa -- one of the biggest engines of copyright theft and the biggest brand name in music piracy worldwide -- is illegal."
Peer-to-peer (P2P) networks distribute data between users instead of relying on a central server.
Sharman Networks said it was disappointed with the judge's decision, and that it planned to appeal.
The consequences of the Kazaa ruling on illicit file-sharing are uncertain. Previous legal crackdowns on P2P services have usually only served to send users to other networks.
"Inevitably, when you have successes it drives people elsewhere,"
IFPI boss Malcolm said. "We know we're never going to completely eradicate
this kind of piracy, but the progress has been remarkable."
