An Australian judge has declared that people using peer-to-peer software from Kazaa are infringing copyright.

Federal Justice Murray Wilcox, of the Federal Court of Australia in Sydney ruled that the operators of the Kazaa file-sharing network authorized the widespread violation of copyright works. He ordered that significant changes be made to how the service works.

The judge did not order that the service be shut down. But he said that changes must be made in order to prevent, to the extent possible, any further copyright violations.

The decision comes as a blow to Kazaa operator Sharman Networks, which has been battling the closely-watched case since early last year.

The company said it was disappointed with the decision and vowed to appeal it vigorously. The company will not comment further until it has studied the decision in detail, a spokeswoman said.

The case against Sharman Networks was filed by the local subsidiaries of most of the big recording labels, including Universal Music Group, Sony BMG Music Entertainment and EMI.

Sharman Networks, along with five affiliates named in the case, was ordered to pay 90 per cent of the labels' legal costs. A further hearing will take place to determine monetary damages, Justice Wilcox ordered.