Updated at 1:30 p.m. PST with more comments and background.
TorrentSpy may be its own worst enemy.
A federal judge has ruled against the BitTorrent indexing service TorrentSpy.com saying that its hiding and destruction of evidence made a fair trial impossible.
A Los Angeles court agreed with the Motion Picture Association of America's attorneys that the extraordinarily harsh sanction of terminating the case was necessary because TorrentSpy operators' actions impacted the ability for the movie studios to prove its case.
"The court finds that plaintiffs have suffered prejudice, to the extent that a rightful decision is not possible," the ruling said.
"Defendants' conduct during discovery in this case has been obstreperous," the court concluded. "They have engaged in widespread and systematic efforts to destroy evidence and have provided false testimony under oath in an effort to hide evidence of such destruction."
TorrentSpy operators intentionally modified or deleted directory headings naming copyrighted titles and forum posts that explained how to find specific copyrighted works; concealed IP addresses of users; and withheld the names and addresses of forum moderators, the court found. They had earlier been fined $30,000 forand were warned of severe sanctions if they continued to ignore the orders.
The court's decision is a "significant victory for the major Hollywood studios," John Malcolm, executive vice president and director of worldwide antipiracy operations for the Motion Picture Association of America, said in a statement. Illegal copying and bootlegging costs the industry $11 billion globally, according to the MPAA.
TorrentSpy's San Francisco-based attorney Ira Rothken disagreed with the findings and called the terminating ruling "draconian in nature and unfair." He said he does not believe any data was intentionally destroyed and said some actions were taken to protect the privacy of TorrentSpy users.
Now all TorrentSpy can do is argue over the amount of damages, Rothken said. The company will appeal the decision, he said.
"It's not like they proved their case. It's not like they proved that TorrentSpy infringed copyright," said Justin Bunnell, founder of TorrentSpy. "I think we have a lot of grounds for appeal and we'll pursue it vigorously."
The ruling by U.S. District Judge Florence-Marie Cooper came last week and was formally entered by the court clerk on Monday. The studios sued TorrentSpy in February 2006, alleging that the site promotes and contributes to online copyright infringement.
This summer, TorrentSpy blocked access by U.S. visitors with this alert: "Sorry, but because you are located in the USA you cannot use the search features of the Torrentspy.com website."
TorrentSpy is maintaining its site internationally, with servers located in The Netherlands, Rothken said. "As a practical matter it is business as usual for the site because it is unlikely that a U.S. court could impact international use."
CNET News.com's Declan McCullagh contributed to this report.