Companies providing software that allows on-line swapping of film and music files were given permission to stay in business by a Los Angeles federal judge on Friday. The ruling is seen by studio groups as a greenlight to piracy.

In a case brought by the Motion Picture Association of America (MPAA) and the Recording Industry Association of America against Grokster and StreamCast Networks (whose software is called Morpheus), Judge Wilson said that there was a difference between providing the software for peer-to-peer sharing and operating a central system for doing so.

He described: "a seminal distinction" between Grokster/StreamCast and Napster, which was effectively put out of business by a similar suit. "Neither Grokster nor StreamCast provides the 'site and facilities' for direct infringement. In contrast, Naspter indexed the files contained on each user's computer, and each and every request passed through Napster's servers," said the judge. "Grokster and StreamCast are not significantly different from companies that sell home video recorders or copy machines, both of which can be and are used to infringe copyrights."

The studios, led by MPAA boss Jack Valenti, say they will appeal the ruling to a higher court. They argue that the judge also acknowledged that: "many, if not most, of those individuals who download their software subsequently use it to infringe copyrights."

In the short term the studios and music companies are expected to press on with other anti-piracy efforts. These include use of the internet to spread dummy files and the targeting of people who copy large numbers of files. Music companies recently sued university students for operating a campus-wide file-sharing network.