Under US laws, companies or individuals can be sued in a certain state provided they have "substantial contacts" with that state, or if their conduct was intentionally aimed at the state's residents.
The entertainment industry decided to sue Sharman Networks in California, claiming that KaZaa software has been downloaded by millions of the state's residents, and that many music and film companies whose copyrights have been infringed, are based there.
Sharman Networks asked the court to dismiss the lawsuit. The company, which is headquartered in Australia and operates from the Pacific island of Vanuatu, claimed that it had no substantial business contacts with the US and therefore it could not be sued there.
The company denied that it is trying to avoid legal action against it, claiming that copyright owners can bring their case before an Australian court.
The Los Angeles court, however, sided with the entertainment industry's arguments. It ruled that the lawsuit can proceed in California, reasoning that the company engages in "a significant amount of contact" with California residents, and that most digital copyright owners allegedly affected by the company's activities are based in the state.
The ruling contrasts a December 2002 decision of the California Supreme Court, which said that a Texas resident accused of distributing DVD-cracking software over the internet could not be sued in California, because he did not specifically targeted Californian internet users.