The ISP, iiNet, was sued in 2008 by 34 entertainment companies, including Paramount Pictures, Warner Bros. and Disney, for allegedly failing to stop peer-to-peer file sharing of their copyright material.

Australia's High Court, which released the decision on its website Friday, found that iiNet did not "authorize" the copyright infringement by its users. The High Court's decision is final, meaning the entertainment industry can't appeal.

iiNet said that the judgment shows the company never encouraged file sharing. The company said it would work with the film industry to make licensed digital content available.

The Australian Federation Against Copyright Theft (AFACT) said the decision showed "failure of copyright law to keep pace with the online environment" and pointed to a need for stronger copyright laws.

The entertainment industry sought to prove that iiNet had authorized the infringement by failing to react to warning notices sent by AFACT. In February 2010, the Federal Court ruled that iiNet did not meet the test for authorization, even though the ISP had not used legal and technical measures available to it to try and stop the infringement.