Australia's film and TV industries have failed in their landmark attempt to hold an Internet service provider liable for illegal file-sharing.

The Federal Court in Sydney on Thursday (Feb. 4) ruled in favor of iiNet, which had been accused of supporting copyright infringement by failing to stop its customers from distributing copyright-protected files.

A group of 34 studios and broadcasters, including the Australian companies of Village Roadshow, Universal Pictures and Warner Bros Entertainment, launched litigation against iiNet November 2008 claiming the ISP had infringed copyright laws. The legal action was launched under the banner of the Australian Federation Against Copyright Theft (AFACT).

While accepting findings of copyright infringement by iiNet customers, Justice Dennis Cowdroy today declared that the Perth-based ISP did not authorize any such illegal activities.

"I find that iiNet simply cannot be seen as sanctioning, approving or countenancing copyright infringement," Cowdroy said in his judgment. "The requisite element of favoring infringement on the evidence simply does not exist. The evidence establishes that iiNet has done no more than to provide an Internet service to its users."

Following today's verdict, iiNet declared it was keen to engage with the film industry and copyright holders to "make this material legitimately available." In a statement, the ISP boasted, "We have never supported or encouraged breaches of the law, including infringement of the Copyright Act or the Telecommunications Act." iiNet, the company said, "has always been, and will continue to be, a good corporate citizen and an even better copyright citizen."

The music industry has closely watched the case from the sidelines, but played no role in the action.

Following the ruling, AFACT understandably said it was "disappointed" with the result. "Today's decision is a set-back for the 50,000 Australians employed in the film industry," commented AFACT executive director Neil Gane. "But we believe this decision was based on a technical finding centered on the court's interpretation of the how infringements occur and the ISP's ability to control them."

AFACT will now consider the decision before deciding on its next move.