Justice Murray Wilcox of Australia's Federal Court ruled largely in favor of music labels, including Universal, Sony, Warner and Festival Mushroom, which had argued that the Kazaa software--owned by Australian-based Sharman Networks--was used to undertake copyright infringement on a massive scale. The labels had also targeted United States-based Altnet, which provides a search technology for Kazaa and is a close partner of Sharman.

Wilcox also ordered respondents Sharman Networks, LEF Interactive, Sharman CEO Nicole Hemming, Altnet and Brilliant Digital Entertainment boss Kevin Bermeister to pay 90 percent of the music industry's court costs.

The judge dismissed the music industry's claims the Kazaa parties had contravened Australia's Trade Practices Act and engaged in conspiracy, as well as dismissing as "overstated" the industry's allegation that Kazaa's managers were engaged in copyright-infringing behaviour themselves. "The more realistic claim is that the respondents authorized users to infringe the applicants' copyright in their sound recordings," he said.

Kazaa can remain in operation, Wilcox said, if the software maker meets either of two conditions. First, "non-optional key-word filter technology" would need to be included in current versions of the software received by new users and in future versions of the software and if "maximum pressure" was exerted on existing users to upgrade to a new version containing the technology. The other option was that the Altnet search software--called TopSearch--be restricted to providing lists of non-copyright-infringing works.