Less than a week before the trial between file-hosting service Hotfile and the MPAA was scheduled to start, both parties have agreed on a settlement. The movie studios wanted up to half a billion dollars in damages but settled the case for $80 million. Hotfile will be allowed to stay online if it starts using filtering techniques to prevent copyright infringement, but with the sudden disappearance of its "premium" subscriptions its future is uncertain.

As one of the most used file-sharing sites on the Internet, Hotfile has been a prime target for Hollywood.

February 2011 the MPAA filed a lawsuit against the file-hosting service. Since then they have been battling fiercely in court and after some delays a trial was scheduled to start next Monday.

However, as in the case against isoHunt, the MPAA has decided to settle the case before a jury can decide on the matter. A few hours ago the movie studios announced that they have signed a $80 million settlement with the file-hosting site.

The countersuit, where Hotfile accused Warner Bros. of abusing its DMCA takedown procedure, is believed to be dropped as well under the agreement.

The settlement deal was rubber stamped by the U.S. District Court for the Southern District of Florida, and requires Hotfile to shut down its operations unless it starts using “digital fingerprinting” technology to filter out copyright infringing content.

The MPAA is happy with the outcome which it says will help to protect the rights of copyright holders on the Internet. “This judgment by the court is another important step toward protecting an Internet that works for everyone,” MPAA boss Chris Dodd says.

“Sites like Hotfile that illegally profit off of the creativity and hard work of others do a serious disservice to audiences, who deserve high-quality, legitimate viewing experiences online,” Dodd adds.

At this point it is still unclear what the settlement means for Hotfile and its millions of active users. TorrentFreak asked the company for a comment on their future plans but we have yet to hear back.

Implementing filtering techniques is a drastic step, but not an unusual one in the file-hosting business. MediaFire, for example, successfully employs “digital fingerprinting” technology and remains the most-used cyberlocker on the Internet.

According to the MPAA, it should be fairly straightforward for Hotfile to do the same.

“The ‘digital fingerprinting’ copyright filtering ordered by the Court is proven to work and readily available from several commercial technology providers. Major websites and content services have been using the technology for years,” the MPAA notes.

The question is, however, whether Hotfile wants to go down this route. The company has removed the “premium plans” from its website and TorrentFreak has learned that several affiliates haven’t been paid out lately, which could mean that Hotfile is preparing to cease its operations.

While the settlement doesn’t come as a complete surprise, many people would have liked to see a jury rule on the matter. But perhaps it’s in the best interest of both Hotfile and the MPAA to end the case behind closed doors.

Update: Hotfile has shut down.