Last month, seven major movie studios and the Seven Network filed suit against iiNet for allegedly allowing its users to download pirated movies and TV shows. The landmark case will determine the lengths to which an internet provider must go to prevent illegal downloading on its network. A loss for the movie industry could leave it no choice but to go after individual downloaders, as has occurred in the US.

The movie studios argue that iiNet had a responsibility to disconnect customers they had identified as illegal downloaders. iiNet has vowed to vigorously defend the case, claiming it forwarded copyright infringement notices sent to it by the Australian Federation Against Copyright Theft on to police and it was up to them, not iiNet, to decide whether someone was guilty of copyright infringement. ISPs argue that, like Australia Post with letters, they are just providing a service and should not be forced to become copyright police.

In today's directions hearing lawyers for iiNet began to frame its defense, saying the company "just provides the pipes". Conversely, the TV and movie industry want ISPs to disconnect people it has identified as repeat infringers. There would be no involvement from police or the courts and the industry would simply provide the IP addresses of users they believe to be illegal downloaders.

The movie industry's lawyers said in court today they would reject iiNet's claims that it was not liable for the actions of its users due to safe harbour provisions introduced with the US free trade agreement. The iiNet case is similar to the one the music industry brought against the Kazaa file sharing service in 2002, which ended in 2006 with Kazaa's owners handing over $100 million in damages. Additionally, in 2005, Stephen Cooper, the owner of MP3s4free.net, and the website's host, E-Talk Communications, were successfully sued by the music industry for infringing copyright by publishing hyperlinks to sites that contained illegal music.

Both cases were referenced by lawyers representing the movie studios in court today. But copyright law experts have said both cases were different because they showed a clear knowledge and encouragement of copyright infringement, whereas iiNet simply provides the internet connection and is in no way directly involved with illegal downloading.

The case returns to court for another directions hearing on February 6.