A previous verdict which upheld the legitimacy of defending file-sharing companies Grokster and Morpheus has been upheld by the 9th Circuit Court of Appeals by unanimous 3-0 decision. The court found that blaming P2P companies for the actions of some of their users, thereby giving relief to record label and music companies, would be an "unwise" revision of existing copyright law.

"Thus, it is prudent for courts to exercise caution before restructuring liability theories for the purpose of addressing specific market abuses, despite their apparent present magnitude," the judges wrote in their opinion.

The court found the defendants did not "materially contribute" to copyright infringement, and also held that "the sort of monitoring and supervisory relationship that has supported vicarious liability in the past is completely absent in this case."

The court is referring, above, to the 2000 judgment that put the original Napster out of business.

See the official court ruling document here.

This latest ruling, one of a string of judgments that have supported the right of P2P companies to operate, upholds the "Betamax Ruling" of the Supreme Court which established the legal legitimacy of videocassette recorders. At that time, the movie industry led by short-sighted MPAA chief Jack Valenti (recently retired), screamed that VCRs would destroy movies. Hollywood and the music business are screeching the same song now, regarding file-sharing.

The Electronic Frontier Foundation (EFF) handled the appeal arguments on behalf of the P2P defendents. Fred von Lohmann was the lead attorney, and his performance in argument was widely hailed as brilliant. (Download the audio here.) On the other side, one industry lawyer repeatedly forgot the judge's name.

The upshot of this landmark judgment? On one hand, the same as previous landmark judgments: P2P file-sharing companies have a right to exist. Don't confuse the technology with use of the technology. On the other hand, expect ever louder drum beats in D.C. for the Induce Act, which specifically targets P2P (and incidentally targets nearly every other modern technology.