The ruling was a key test of how far copyright holders can prevent people from using materials they legally obtained in the name of preventing others from engaging in piracy.
Jon Lech Johansen, who was 15 when he developed and posted the program on the Internet in late 1999, said he was only trying to play DVDs he already owned on his Linux-based computer, which did not already have DVD-viewing software.
Head judge Irene Sogn, in reading the verdict, said people cannot be convicted of breaking into their own property. Sogn said prosecutors failed to prove that Johansen or others had used the program to access illegal pirate copies of films.
"The court finds that someone who buys a DVD film that has been legally produced has legal access to the film. Something else would apply if the film had been an illegal ... pirate copy," the ruling said.
The unanimous, 25-page ruling from the three-member Oslo City Court was the latest setback in the entertainment industry's drive to curtail illegal copying of its movies.
The Motion Picture Association of America had no comment, spokeswoman Phuong Yokitis said from Washington.
Johansen became a folk hero to hackers, especially in the United States, where a battle still rages over a 1998 copyright law that bans such software. He was elated by the verdict.
"I'm very satisfied," he said after Sogn read the ruling. "We won support on all points. I had figured that we could win, but it can go either way."
The prosecution, which had called for a 90-day suspended jail sentence, confiscation of computer equipment and court costs, said it would decide in the next two weeks whether to appeal.
Johansen said he expects another round because this is the first such case in Norway.
"But clearly, winning the first round means a lot," Johansen said.
The ruling found that consumers have rights to legally obtained DVD films "even if the films are played in a different way than the makers had foreseen."
Johansen said that was key.
"As long as you have purchased a DVD legally, then you are allowed to decode it with any equipment and can't be forced to buy any specific equipment," he said.
The film industry developed the Content Scrambling System to encrypt and prevent illegal copying of DVD films. However, the system, usually called CSS, also prevents DVD films from being played on unauthorized equipment.
Johansen's program, which pieces together security codes and other programs sent to him by fellow hackers, breaks the CSS barrier, allowing films to be played and copied on computers.
The short program Johansen wrote is just one of many readily available programs that can break DVD security codes. One is included in a software package, sold by at least one U.S. company, that even burns DVDs after cracking the copy protection.
Charges against Johansen were filed after Norwegian prosecutors received a complaint from the MPAA and the DVD Copy Control Association, the group that licenses CSS.
Prosecutors asserted that the program, in effect, left film studios' property unlocked and open for theft. The prosecution decided to charge Johansen with a data break-in, rather than handle the matter as a copyright case.
Prosecutors also accused Johansen of being an accessory to others making illegal copies of films by posting his program on the Internet.
Johansen had claimed he posted the program for others to test.
By Doug Mellgren