Peer-to-peer networks cannot escape copyright infringement claims by giving members the ability to mask the content that changes hands on their networks, a federal appeals court rules.

Operators of peer-to-peer networks cannot escape copyright infringement claims by giving their members the ability to mask the content that changes hands on their networks, a federal appeals court ruled Monday.

Calling the tactic a form of "willful blindness," the 7th U.S. Circuit Court of Appeals in Chicago upheld a lower court's injunction against the Madster file-swapping network that had ordered the service shut down pending a trial. But, in a mixed decision, the court also bolstered a key defense argument invoking a comparison between file-swapping software and personal home video recording.

Before it was shut down, Madster had offered its users the ability to encrypt files traded over America Online's AOL Instant Messenger client. As a result, its operators had argued that they had no obligation to seek to block illegal files swapped on the network because they were unaware of specific copyright violations.

In a decision that could dampen efforts to bring privacy to file-swapping networks, the court on Monday rejected that reasoning.

"One who, knowingly or strongly suspecting that he is involved in shady dealings, takes steps to ensure that he does not acquire full or exact knowledge of the nature and extent of those dealings, is held to have criminal intent," the panel wrote in the 23-page decision.

Privacy in file-swapping was put on the front burner last week when the Recording Industry Association of America said it would begin investigations aimed at bringing lawsuits against individuals who make large numbers of files available for uploading on peer-to-peer networks such as Kazaa, Morpheus and Grokster.

Since June 17, a file-swapping client promising improved privacy known as Blubster 2.5, has seen more than 3.3 million downloads