Businesses offering free wireless internet services cannot be held liable for illegal downloads, the European Union's top court ruled Thursday, in a case pitting electronics giant Sony against a German shop owner.

Sony had taken the owner of a German sound and light system shop to court, after an internet user unlawfully offered music for download via the shop's free public wifi network. The Munich judges ended up referring the issue to the European Court of Justice (ECJ).

The Luxembourg-based court found that businesses providing free wifi in the hope of attracting potential customers are offering a service, and cannot be held liable for unlawful acts committed by others via that internet connection.

Sony, which holds the copyright for the music, is therefore not entitled to claim compensation or seek reimbursement for its court costs.

However, the court did find that Sony could demand that the internet connection be password protected in a way requiring users to identify themselves before accessing the network.

The shop owner, Tobias Mc Fadden, described the ruling as a partial victory, as everybody should have easy internet access.

"However, if I have to run around first and beg for a password, then it achieves the exact opposite," said the internet activist, who is also a member of Germany's Pirate Party.

Germany's Bitkom digital association welcomed the court's decision, arguing that it gave public wifi operators more legal security and removed the risk of them having to pay compensation for rights abuses committed by people using their network.

The ECJ has referred the case back to the Munich court for a final verdict.

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