The High Court has effectively said that they will only be on the hook for 'authorising' infringement by their users if they fail to put in place some fairly basic safeguards and set their systems up is such a way that they are, to all intents and purposes, apparently sanctioning the infringements.
It is easy to forget, amidst the Parliamentary wrangling currently surrounding the Digital Economy Bill, that passing an Act in Parliament is only one part of making law. Until judges have examined case after case and interpreted what the law means in all sorts of situations, companies can feel dangerously exposed, not knowing if their activities fall on one side of the law or another.
This is a problem most acute with new kinds of business, and few come newer than the ever-changing world of online services.
For ISPs and search engines the problem is that long-established copyright law has not been the subject of many internet-related cases in the dozen or so years that most of us have been online.
So when the question of whether or not a search engine 'authorises' the infringement of its users if they use the search engine to find illegal downloads comes up, companies had to rely mainly on an old case about tape-to-tape copying. Until now.
The High Court has told Usenet indexing company Newzbin that it is liable for the copyright infringement of its users, that it did 'authorise' that copying by organising its system to encourage the downloading of films and TV programmes that were protected by copyright.
The case is the first in the UK to apply the prohibition on authorising infringement in a specific internet context. We have had international rulings featuring household names such as Kazaa, The Pirate Bay and even a recent ruling from Australia, whose copyright law is very like ours. But uncertainty will always remain until UK courts themselves give an opinion.
So what did it say? Nothing that will be of great surprise to ISPs and indexers, but enough to give them some comfort. Uncertainty over the law will have nagged at these providers, and this week's ruling will be enough to silence their worries.
Companies should behave as many already do: they should operate 'notice and takedown' policies and actually implement them. They are not liable for infringements they do not know about, but should have a structure in place to let rights-holders alert them to unlawful material.
Once alerted, they must act. Newzbin had notices telling people not to infringe and a notice and takedown policy, but the Court found that its behaviour didn't match its words. The judge called it "window dressing" and said that the Court would look at the company's behaviour, not its words.
Another important factor for the Court was the fact that the enabling copyright infringement seemed to be the company's entire reason for being in business. It claimed to perform other functions, but the Court found that these, too, were flimsy claims not backed up by the actuality of how the service performed.
It collected money from members who accessed copyright-infringing material. That this appeared to be the entire raison d'etre of the company was an important factor in the verdict.
Indeed, when directly questioned in Court one of the men who ran the operation could not even think of other uses for the system in some contexts than copyright infringing activity.
It did not help Newzbin's case, either, that it actually used people as editors to gather together infringing material, badge it consistently and make it easier for users to download.
Instructions given to the editors and seen by the Court appeared to encourage those editors to organise and therefore promote copyright-infringing material because that is why the users came to the service.
The case confirms many of the measures service providers will already have in place. Their effectiveness was demonstrated in an Australian case earlier this year, when ISP iiNET was found not to be liable for authorising infringement because it had an adequate notice and takedown policy in place. The fact that it provided users with access to the internet did not mean that it was authorising the infringements carried out by its users who then used BitTorrent for illegal purposes.
So the result will not be a surprise to any lawyers at ISP or other service provider businesses who followed the case. But this is the first time that a UK court has addressed these issues head-on, and it will at least allow them to resolve some of their anxieties about how a UK court would look on the issue of liability for others' infringement.
By Kim Walker, a partner of Pinsent Masons, the law firm behind OUT-LAW.COM.