Australia's High Court on Friday dismissed the movie studios' last-ditch attempt to hold the iiNet Internet service provider accountable for copyright theft on its network.

Trade association the Australian Federation Against Copyright Theft's (AFACT) had originally taken legal action after, it claimed, iiNet ignored repeated notices to act on illegal file transfers; it cited 94,000 such instances in court documents.

But the High Court didn't see it that way. The Court found that iiNet didn't authorize its customers' copyright infringement and the appeal was dismissed in a 5-0 unanimous verdict.

In a summary, the judge noted that iiNet had "no direct technical power to prevent its customers from using the BitTorrent system" to infringe copyright.

AFACT represents 34 Australian and U.S. movie companies and Sydney-based broadcaster Seven Network. The industry group launched its case in November 2008 arguing that iiNet had failed to take adequate steps to prevent known repeat copyright breaches by users on its network. The studios' case was ultimately rejected, and AFACT subsequently appealed the decision in the Federal Court of Australia. That appeal too was rejected.

AFACT subsequently turned to the country's High Court -- the final court of appeal -- in a final effort to overturn the Federal Court ruling.

The music industry has been closely following this landmark copyright infringement case, as has the national communications minister Stephen Conroy. Many believe the outcome of this trial could shape the country's stance on "three-strikes" anti-piracy legislation, something the record industry would welcome.

Following today's result, iiNet CEO Michael Malone reiterated earlier comments that his company doesn't endorse copyright infringements by its customers. "iiNet has never supported or encouraged unauthorized sharing or file downloading," he said. Malone then turned up the heat on the studios and appealed for a more practical licensing framework.

"Increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright," Malone noted. "We have consistently said we are eager to work with the studios to make their very desirable material legitimately available to a waiting customer base - and that offer remains the same today."

iiNet said legal costs of the case to date were approximately $9 million Australian ($9.29 million) and had already been expensed.

A beaten AFACT said today's decision by the High Court exposed the failure of copyright law to keep pace with the online environment. The trade body's managing director Neil Gane urged the government to intervene.

"The Judges recognized the significant rate of copyright infringement online and pointed to the fact that over half the usage of iiNet's internet service by its customers (measured by volume) was represented by BitTorrent file-sharing which was known to be used for infringing activities," Gane said.

"Now that we have taken this issue to the highest court in the land, it is time for government to act. We are confident the government would not want copyright infringement to go on unabated across Australian networks especially with the rollout of the NBN (National Broadband Network)," he said.

Meanwhile, the music industry and iiNet are understood to be working on a wider solution. Regardless of today's result, sources familiar with the situation tell "We're knocking on the door of a graduated response. It's close."