Judge: File-swapping tools are legal

A federal judge in Los Angeles has handed a stunning court victory to file-swapping services Streamcast Networks and Grokster, dismissing much of the record industry and movie studios' lawsuit against the two companies.

In an almost complete reversal of previous victories for the record labels and movie studios, federal court Judge Stephen Wilson ruled that Streamcast--parent of the Morpheus software--and Grokster were not liable for copyright infringements that took place using their software.

The case will certainly be appealed. Because different courts have come to very different conclusions about the law, the issue could go as high as the U.S. Supreme Court, a process that would likely take years.

The two pieces of file-swapping software affected by Friday's ruling remain among the most popular downloads on the Net, although they operate deep in the shadow of market leader Kazaa. Morpheus--once the undisputed leader--has fallen to about 120,000 downloads per week, according to Download.com, a software aggregation site operated by News.com publisher CNET Networks. Kazaa, by contrast, was downloaded more than 2.7 million times during the past week.