A federal judge ruled today that Streamcast, the distributor of the Morpheus peer-to-peer (P2P) file-sharing software, encouraged its users to commit copyright infringement by illegally sharing music, movies, and other copyrighted works.

The decision deals a major blow to one of only two P2P firms that had decided to fight back against the legal wrath of the Recording Industry Association of America in the wake of the June 2005 landmark US Supreme Court decision that found that Grokster and Morpheus could be held liable for copyright infringement on their networks. The other is LimeWire, which recently filed a countersuit against RIAA.

In a 60-page ruling, US District Judge Stephen Wilson granted the entertainment companies' motion for summary judgment, concluding there was more than enough evidence of "massive infringement" on StreamCast's network, despite the company's arguments that it did not encourage computer users to violate copyright laws.

"In the record before the court, evidence of StreamCast's unlawful intent is overwhelming," Wilson wrote.

A StreamCast spokesman could not be reached for comment on the ruling.

StreamCast's Morpheus was a direct descendant of Napster, which largely spawned the P2P revolution in the late 1990s and early 2000s. In 2001, Morpheus was built on the back of the Napster application, as StreamCast--then called MusicCity--distributed its OpenNap software. The app allowed Napster users to use their existing Napster software to access the network, giving StreamCast a chance to poach Napster's massive user base, which was looking for alternatives at the time because of Napster's legal woes.

The decision quotes from an e-mail that StreamCast CEO Michael Weiss sent out at the time: "When Napster pulls the plug on their free service (or if the court orders them to shut down prior to that), we wil be able to capture the flood of their 32 million users that will be actively looking for an alternative," Weiss wrote.

In arguing its case, StreamCast claimed that it should only have been found liable for copyright infringement if it took steps beyond distributing the software used to share music and movies, such as providing users with instructions on how to share files.

"StreamCast's legal theory is plainly contrary to the Supreme Court's holding in Grokster," Wilson wrote.

The court wrote that StreamCast didn't pass its own test, saying the company offered assistance to users, such as help in playing back illegally shared files. The court also said that StreamCast took no meaningful steps to prevent infringement on its networks, such as by building a filtering system into its software to prevent the sharing of copyrighted works.

"In sum, evidence of StreamCast's objective of promoting infringement is overwhelming," the court wrote

The decision could have an impact on LimeWire's recent countersuit against the RIAA, which claims that the major labels have colluded to prevent LimeWire from obtaining licenses that would allow it to become a legal service. In that case, LimeWire charges the major record labels with anticompetitive practices, claiming they "have unreasonably and concertedly refused to do business with LimeWire" in an attempt to "prevent the use of decentralized peer-to-peer technology for the secure distribution of licensed, copyrighted content."

StreamCast made the same argument in its case, but the court found its argument "unpersuasive," saying that as copyright holders, the label has the right to exclude firms from licensing it. "The right to exclude is inherent in the grant of a copyright," the court wrote.

In the wake of the Supreme Court ruling, the RIAA sent out numerous cease-and-desist letters to the major P2P services. Many of them have gone under or gone legit since then, although many derivative services have filled the void.

To date, iMesh, Kazaa, Mashboxx, Qtrax, eDonkey and Grokster have all paid a settlement and gone the legal route. WinMX has folded, while Bearshare settled for $30 million and folded its assets into iMesh.

In a statement, RIAA CEO Mitch Bainwol touted the decision as one more win for the music industry.

"No single court ruling solves piracy or can make up for several challenging years for the music community, but there's no doubt that the rules of the road for online music are better today than they were yesterday," Bainwol said.