Some of Hollywood's largest film studios have lost their High Court appeal in a landmark case over illegal internet downloads.

In a unanimous decision, the High Court found that Australia's second largest internet service provider, iiNet, had not authorised copyright infringements.

The court also ruled that iiNet had no technical means to prevent its customers from using the Bit Torrent system to infringe copyright through file sharing.

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

The Australian Federation Against Copyright Theft (AFACT) was challenging a Federal Court ruling in February last year that iiNet was not liable for its users' copyright infringements.

AFACT had taken the Perth-based company to court alleging it had failed to stop its customers illegally downloading movies and television shows.

In the initial case in 2010, the studios had tried to prove that iiNet not only failed to take steps to stop illegal file-sharing, but also breached copyright by storing the data and transmitting it through its system.

The federation of 34 film, television and music companies - including the Seven Network, Warner Bros, 20th Century Fox, Walt Disney Studios and Village Roadshow - said iiNet and other internet companies should be charged if customers downloaded copyrighted material.

iiNet chief executive Michael Malone said the company had neither encouraged nor supported unauthorised file sharing or downloading.

"Today's High Court five-nil ruling confirms that iiNet is not liable for 'authorising' the conduct of its customers who engaged in online copyright infringement," Mr Malone said in a statement.

Mr Malone said he believed that content partnerships between ISPs, legal websites and copyright holders had done more to reduce online piracy than court battles.

"Increasing the availability of licensed digital content is the best, most practical approach to meet consumer demand and protect copyright," he said.

AFACT managing director Neil Gane said the group would lobby for changes to copyright laws.

He said the ruling showed Australian legislation had failed to keep up with technological change, and the Government should follow the lead of countries such as the United States and overhaul laws to protect copyright online.

"The High Court has unanimously given a judgement that the only fix is a legislative fix," Mr Gane said.

"It would seem apparent that the current Australian Copyright Act is incapable of protecting content once it hits the internet on peer-to-peer networks, and the recommendation of the High Court is for amended legislation."

Shares in iiNet had been placed in a trading halt before the decision was announced.

The halt has since been lifted and at 12:30pm (AEST) iiNet shares were 2.3 per cent higher at $3.10.