According to California's 9th Circuit Court legal file sharing will continue. The court rule in favor of The Electronic Frontier Foundation (EFF) who argued on behalf of Streamcast, the creator of the Morpheus software, that software developers were not liable for any copyright infringement committed by people using their products. The decision is available in PDF from the California's 9th Circuit Court website.
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However, the ruling does not state that file sharing itself is legal. Users continue to break the law by sharing and downloading copyrighted material through P2P programs. The ruling states that the providers of such software will not be liable for how users use their programs. This ruling won't prevent users from getting sued by the music and movie industries for sharing their material. The question now is whether or not Congress will limit the technology to non-infringing uses, or ban it altogether.
From the EFF press release, "Today's ruling will ultimately be viewed as a victory for copyright owners. As the court recognized today, the entertainment industry has been fighting new technologies for a century, only to learn again and again that these new technologies create new markets and opportunities," said EFF Senior Intellectual Property Attorney Fred von Lohmann. "There is no reason to think that file sharing will be any different."
This is one step closer to protecting those sharing on P2P networks.