In a decision that could have privacy implications outside the P2P sphere, a federal appeals court has ruled that the Madster P2P network could be liable for copyright infringement, despite the fact that it could not view the encrypted files being swapped on its network.The 7th U.S. Circuit Court of Appeals in Chicago upheld a lower court's injunction against Madster, formerly called Aimster. In December, the Northern Illinois District Court ordered the shut down of the service pending a trial after Madster failed to comply with a preliminary injunction ordering it to put an end to copyright infringement.Madster had allowed users to encrypt files exchanged via AOL Instant Messenger. Operators of the Madster service said they could not block files swapped using its software because it could not view them to see whether they violated copyright. But the appeals court called this argument "willful blindness."In its July 1 decision, the court ruled that, "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 appeals court did not accept the claim made by the recording industry that because Madster\/Aimster could block users that traded copyrighted files, it should be liable for contributory copyright infringement. The court waffled on this point issuing a vague, nonsensical ruling that if locating and halting copyright infringement was "highly burdensome" to a service, then they could not be prosecuted for infringement.Is breaking into encrypted files "highly burdensome?" Other file trading services are beginning to offer users the ability to encrypt files, and encrypted mail files and attachments traverse ISP networks all the time. Are these service providers responsible for the copyrighted content of these files? What about the creators of a highly distributed networks in which the operating software is passed from user to user? Madster operator Johnny Deep says he will appeal the injunction based on the argument that the appeals court ruling is too broad.The Recording Industry Association of America has already announced that it will sue individual file traders who swap large numbers of files on Kazaa, Morpheus and Grokster. But the Madster decision may give support to P2P networks that fight future lawsuits.The court upheld a legal argument that equated Madster with Sony's Betamax video recorder, which the motion picture industry attempted to take off the market. The 1984 Supreme Court ruling of Sony of America vs. Universal City Studios found that offering a product with "substantial non-infringing uses" does not itself constitute contributory infringement, even if that product is used by others for this purpose. The court ruled that Sony could not be held responsible for the unlicensed copying on its Betamax recorder of copyrighted works. P2P networks could fall under the same legal framework.