Hollywood Studios Suffer Another Crushing Setback in Piracy Fight

Major U.S. movie studios, including Walt Disney (NYSE:DIS) and Warner Bros. (NYSE:TWX), lost an appeal on Friday in a lawsuit in which they had accused an Australian Internet provider of not stepping in to prevent the illegal downloading of films.

Australia’s top court upheld an earlier ruling that the Perth-based iiNet Ltd. couldn’t be held liable for customers illegally downloading films. More than 30 studios and license holders had collectively asked the court to force Internet providers to monitor customers’ usage and cut them off for illegally downloading copyrighted material. They were also seeking damages that included lost royalties.

Roadshow Films, Viacom’s (NASDAQ:VIAB) Paramount Pictures, and News Corp.’s (NASDAQ:NWSA) Twentieth Century Fox were also involved.

Australia’s High Court ruled iiNet didn’t authorize the infringement and was hence not liable. Last year, an appeals court had upheld a 2010 verdict stating the same. The High Court was reviewing the appeal.

The case stemmed from an illegal download of Sony’s (NYSE:SNEPineapple Express by an iiNet user in 2008 through the BitTorrent application. The studios said iiNet should have warned its customers that downloading unauthorized content was illegal.

An iiNet lawyer told the court the company does take steps to encourage people to use legitimate content, including an agreement with Apple’s (NASDAQ:AAPL) iTunes that lets customers download films without affecting their monthly allowance.