The Australian High Court dealt a blow against major Hollywood film and television studios when it upheld a previous ruling that internet service provider iiNet did not authorize copyright infringement when its customers downloaded movies and television programs.

A group of international film and television studios, including Warner Bros, Disney and 20th Century Fox, alleged that iiNet authorized the infringement of their copyright when its customers downloaded pirated material. The U.S. and Australian studios had wanted iiNet to stop its customers from downloading illegal television and film content. In 2010, an Australian federal court had ruled in favor of iiNet saying it did not authorize the illegal downloads nor did it have the power to stop such downloads.

The Australian Federation Against Copyright Theft (AFACT) made up of 34 film, television and music companies, appealed the decision claiming it set a precedent that will allow Internet companies to ignore copyright theft. A unanimous decision by Australia's highest court on Friday stymied their fight against online piracy.

"The High Court held that the respondent, an Internet service provider (ISP), had not authorized the infringement by its customers of the appellants' copyright in commercially released films and television programmes," the court stated.

The court also stated that iiNet did not have the technical power to prevent its customers from using the BitTorrent file sharing system to infringe copyright.

"Rather, the extent of iiNet's power to prevent its customers from infringing... copyright was limited to an indirect power to terminate its contractual relationship with its customers," the court said.

The Australian Federation Against Copyright Theft expressed dismay over the ruling saying that the government needs to act on this issue.

"Today's decision by the High Court exposes the failure of copyright law to keep pace with the online environment and the need for Government to act."

"Both judgments in this case recognize that copyright law is no longer equipped to deal with the rate of technological change we have seen since the law of authorization was last tested," the group's managing director, Neil Gane, was quoted by news agency Agence-France Presse said.

Other experts have weighed in on the matter and have advised ISPs to work with the content providers to find a copyright solution to avoid a severe government approach. Telsyte director of research consulting, Chris Coughlan, said ISPs would need to work with the content providers to talk about copyright issues.

"I think they need to work constructively to try and limit this sort of activity, which is hard, especially when you've got proxy servers in other countries, and things like layer three encryption and so on," he said. "There are various ways to facilitate [content sharing] without even coming onto the radar so it's difficult to close it down altogether. I think there are ways and means, though, of protecting their rights to a large degree but I don't think you'll ever close down this sort of content sharing."