The Federal Court of Justice, Germany's highest court on non-constitutional questions, has ruled that file-sharing sites share responsibility for infringement by their users if notified of such infringement by copyright holders. The decision is a setback for RapidShare, which had argued it should not be required to proactively monitor its users' content.

The case was initiated by Atari, which accuses RapidShare of turning a blind eye to piracy of its game Alone in the Dark. Atari won at the district court level, but the ruling was overturned by a German appeals court. The high court has now affirmed the district court's position. The high court rejected RapidShare's argument that it was merely a passive file-storage service. "The service is called RapidShare and not RapidStore," said Judge Wolfgang Kirchhoff, "and that says it all."

It remains unclear exactly what the ruling obligates RapidShare to do. RapidShare is not obligated to monitor or filter content on its site in general. As the court wrote (translation courtesy of Google) "An examination of the defendant's obligation with respect to the computer game Alone in the Dark arises only when the defendant has been advised of a clear violation of the law in relation to this game."

But once RapidShare was notified of one infringing copy, the court said, it should have proactively checked its site for other copies of the same material. The court held that RapidShare needs to do what is "technologically and economically reasonable" to prevent unauthorized sharing.

Of course, it's also far from clear what that means. For example, Atari has suggested that RapidShare could do keyword-based searches of third-party link sites to see if any of the results point to RapidShare-hosted files. However, the court said, RapidShare can only be expected to monitor a "manageable number" of link sites.

If that sounds vague, it's because the high court didn't actually decide on RapidShare's exact obligations. Instead, it sent the case back down to the district court. There, it will be decided exactly how much monitoring RapidShare must do to comply with the law.