U.S. District Judge Kimba Wood issued the 59-page decision Wednesday, siding with the 13 record companies that sued Lime Wire LLC and founder and Chairman Mark Gorton for copyright infringement and unfair competition.
Wood found that the defendants knew their technology was being used to download copyrighted tunes and took no "meaningful steps" to prevent the infringement. In addition, Lime Wire marketed its software to people "predisposed to committing infringement" and assisted those people, the judge ruled.
Lime Wire Chief Executive George Searle issued a statement saying the company "strongly opposed the court's recent decision," but did not say it would appeal the ruling.
"Lime Wire remains committed to developing innovative products and services for the end-user and to working with the entire music industry, including the major labels, to achieve this mission," Searle said.
The Recording Industry Association of America said the decision was "an important milestone" in the battle against online copyright infringement, because Gorton was found personally liable, as well as the company.
"The court has sent a clear signal to those who think they can devise and profit from a piracy scheme that will escape accountability," Mitch Bainwol, chairman and chief executive of the RIAA, said in a statement.
LimeWire, launched in 2000, is one of the largest remaining commercial peer-to-peer services left on the Web. The company claims to have more than 50 million monthly users.
The record companies that sued Lime Wire included Arista, Atlantic, BMG Music, Capital, Elektra, Interscope, LaFace, Motown, Priority, Sony BMG, UMG, Virgin and Warner Brothers.
In issuing the decision, Wood referred to the Grokster case in which the Supreme Court ruled in 2005 that the file-sharing service was liable when customers used it to swap songs and movies illegally. The ruling stemmed from a lawsuit filed by MGM Studios.