A U.S. district judge issued summary judgment in favor of the music industry yesterday in its long-running case against the file-sharing service LimeWire.  In her opinion, Judge Kimba Wood (a one-time candidate for Attorney General under President Bill Clinton) invoked — among other things — the “inducement” theory of secondary infringement liability that the Supreme Court established in its 2005 Grokster opinion.

This is the first case since then to make use of the inducement theory, which Justice David Souter adapted from a similar and well-established concept in patent law.  Under this theory, a party is said to be liable for “inducing” copyright infringement if it actively encourages and/or profits from its users’ actual  infringement.

The next step in this case is a request to the judge to enjoin (shut down) the service; discussions on this topic are set for next month.

It’s worth noting that LimeWire has acted as a goad to the music industry in terms of the legal theories about copyright infringement that it has advanced.  LimeWire disingenuously tried implementing a system for filtering copyrighted works from its network, knowing full well that its system was trivial to hack.  It also claimed in a countersuit that the major recording companies were conspiring to force a certain set of business models on service providers like itself — an alleged violation of antitrust law known as “abuse of intellectual property” that has had a poor track record (no pun intended) of success.

Several other file-sharing networks shut down quickly in the wake of the Grokster decision.  The Supreme Court’s inducement theory hasn’t seen the light of day in Court until now.  If Judge Wood’s decision survives the inevitable appeals process, then future would-be online content service providers will more data points  (other than those from Grokster itself) to guide them in determining where to draw the line between legitimate noninfringing uses of file-sharing technology and secondary liability for copyright infringement.

But it will still take years of additional case precedent to determine whether there is a sufficiently bright-line test for inducement that innovative companies — and their investors — can rely on to manage their legal risks.