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It is the first time anywhere in the world that a peer-to-peer service has been found liable for the illegal sharing of files using its software.

A Tokyo court rejected MMO's appeal and awarded damages of Yen36.89mn (£183,000) to plaintiffs comprsing 19 labels, the Record Industry Association of Japan (RIAJ) and JASRAC, representing song authors.

MMO was also found to have infringed the plaintiffs' right to make their recordings available on the Internet.

The RIAJ applauded the decision and vowed to continue its campaign against file sharing.

'RIAJ will continuously take dratic measures against illegal use of music on the Internet that corrupts the "cycle of music creation" and leads to decline of the music culture,' it said in a statement.

Allen Dixon, general counsel for the International Federation of Phonographic Industries stressed the significance of the ruling.

'This case is important in that it is the first decision world-wide that has found that providing an unauthorised file-sharing service itself constitutes an infringement of record companies' rights to "make available" their recordings on the Internet,' he said.