The Supreme Court of the Netherlands has thrown out an appeal by music industry lobbyists who wanted the popular Kazaa file-sharing software to be ruled illegal.

The victory for Kazaa, which follows similar US rulings in favour of peer-to-peer (P2P) software firms Grokster and Morpheus, is a huge blow to the music industry. It has fought a long battle to close down file-sharing networks and criminalise the software that makes file swapping illegal.

Kazaa's owner Sharman Networks still faces legal action in the US.

The Dutch decision means that the developers of the software cannot be held responsible for how individuals use it.

"The victory by Kazaa creates an important precedent for the legality of P2P software, both in the European Union and elsewhere," said lawyers Bird & Bird, representing Sharman Networks.

But the International Federation of the Phonographic Industry (IFPI) has tried to downplay the ruling's significance.

In a statement the IFPI said: "Today's ruling ... is a flawed judgement, but still leaves no doubt that the vast majority of people who are using file-swapping services like Kazaa are acting illegally - whatever country they are in."

The IFPI said European music organisations are almost certain to follow the example of the Recording Industry Association of America and take legal action against P2P users.

In the group's newsletter, chairman Jay Berman said European music organisations are preparing to sue hundreds - probably even thousands - of individuals who distribute music illegally through P2P networks.

"Lawsuits on a large scale have so far been restricted to the US; this 'fight back' will almost inevitably have to take place internationally as well," he said.