“I find that iiNet did not authorise the infringements of copyright of the iiNet users.”

That’s the key sentence in Justice Dennis Cowdroy’s 636-paragraph ruling handed down in Federal Court 18C in Sydney this morning.

Film industry claims that iiNet, Australia’s third-largest internet service provider, was responsible for its users’ illegal file sharing were dismissed.

Justice Cowdroy also provided one of the clearest legal statements ever of an ISP’s role:

An ISP such as iiNet provides a legitimate communication facility which is neither intended nor designed to infringe copyright. It is only by means of the application of the BitTorrent system that copyright infringements are enabled, although it must be recognised that the BitTorrent system can be used for legitimate purposes as well. iiNet is not responsible if an iiNet user chooses to make use of that system to bring about copyright infringement.

Justice Cowdroy acknowledged the widespread public interest in the trial both in Australia and abroad, believing it to be the first trial of its kind to proceed to hearing and judgement. As Crikey has previous explained, this case has global importance.

“I understand this is the first Australian trial to be twittered or tweeted,” Justice Cowdroy said. “It seems rather fitting for a copyright trial involving the internet.”

The case was initiated by 34 applicants, a Who’s Who of film production including Roadshow, Walt Disney, Paramount, Sony, Twentieth Century Fox, Universal and Warner Bros.

Yet the key player in court was the Australian Federation Against Copyright Theft (AFACT), which says it represents “the 50,000 Australians directly impacted by copyright theft”. That number includes everyone down to the cinema popcorn-sellers and the staff at your local video shop.

“The exact nature of the relationship between the applicants and AFACT is not clear,” Justice Cowdroy noted. However AFACT played a central role in collecting evidence. They employed DtecNet to become an iiNet customer and identify the internet addresses of other customers offering copyrighted material.

Justice Cowdroy agreed that copyright infringement was taking place, although in smaller numbers than alleged. Each user offering a film available through BitTorrent was infringing copyright just once, not once for every time another user downloaded the film.

Nevertheless he ruled that iiNet was not authorising the copyright infringement for three reasons:

first because the copyright infringements occurred directly as a result of the use of the BitTorrent system, not the use of the internet, and the respondent did not create and does not control the BitTorrent system; second because the respondent did not have a relevant power to prevent those infringements occurring; and third because the respondent did not sanction, approve or countenance copyright infringement.

Justice Cowdroy rejected iiNet’s argument that the privacy provisions the Telecommunications Act would prevent them from acting on AFACT’s notices of infringement.

He also ruled that iiNet’s repeat infringer policy was reasonably implemented, so they would have been entitled to take advantage of the safe harbour provisions in Division 2AA of Part V of the Copyright Act rendering them immune from prosecution.

“The law recognises no positive obligation on any person to protect the copyright of another,” Justice Cowdroy said. “The law only recognises a prohibition on the doing of copyright acts without the licence of the copyright owner or exclusive licensee, or the authorisation of those acts.”

AFACT executive director Neil Gane said this morning it was too early to say whether they would appeal against the decision.

Both the Internet Industry Association and the Internet Society of Australia have welcomed the decision.

Disclosure: Stilgherrian is a customer of iiNet, as well as Telstra and Virgin Mobile. He has not communicated with iiNet about this case, nor they with him.