With just days to go before the BitTorrent piracy case involving Aussie ISP iiNet goes to court, anti-piracy group AFACT has made a second significant legal retreat. The group, which represents Hollywood movie studios, has now dropped its claims that iiNet engaged in primary acts of copyright infringement.

Next week the case of Village Roadshow, Universal Pictures, Warner Bros Entertainment, Paramount Pictures, Sony Pictures Entertainment, Twentieth Century Fox Film Corporation, Disney Enterprises, Inc. and the Seven Network (all under the umbrella of AFACT), against Australian ISP iiNet will finally get to court.

AFACT’s position in the case – officially known as Roadshow Films Pty Ltd & Ors v iiNet Ltd – is that iiNet “failed to take reasonable steps, including enforcing its own terms and conditions, to prevent known unauthorized use of copies of the companies’ films and TV programs by iiNet’s customers via its network.”

AFACT previously demanded disconnection for those iiNet subscribers alleged to have infringed their copyrights by sharing material using BitTorrent. iiNet refused to comply and legal action against them followed.

In addition to AFACT’s assertion that iiNet committed secondary acts of infringement, i.e it is responsible for the copyright infringing actions of its subscribers (something it denies), AFACT had earlier claimed that iiNet engaged in primary infringement too.

Now, just days before the trial begins, AFACT has withdrawn this key part of its claim against iiNet.

The ridiculously optimistic primary infringement claim centered around AFACT’s assertion that iiNet cached the illicit content being shared by their file-sharing customers on their own network, which effectively turned the ISP into a distributor of copyright works. Of course, this is how all ISPs and indeed the Internet works – by simply copying digital data from one place to another.

A spokesman for iiNet told AustralianIT that the withdrawal indicated that AFACT’s legal team had earlier “fundamentally misunderstood” how an ISP works and had been “clutching at straws”.

Indeed, it is very difficult to disagree with this assessment, but AFACT remains upbeat.

“The authorization part of the case, which says iiNet failed to prevent online copyright theft of customers, has always been the main part of the case. The cache and conversion claims were always subsidiary,” said an AFACT spokesperson.

This isn’t the first time that AFACT has removed a key claim against iiNet. Earlier the anti-piracy group alleged iiNet was a primary copyright infringer and directly responsible when it refused to disconnect alleged pirates within its subscriber base. The allegation, know as “conversion”, is that iiNet interfered with the studio’s “right of possession”, a breach of their rights. It was later withdrawn.

The outcome of the case will be hugely significant in Australia. If AFACT wins, all ISPs in Australia could be held legally liable if they are made aware of copyright infringers on their network yet fail to take action against them.