The justices, aiming to curtail what they called a ``staggering'' volume of piracy online, largely set aside concerns that new lawsuits would inhibit technology companies from developing the next iPod or other high-tech gadgets or services.
The unanimous ruling is expected to have little immediate impact on consumers, though critics said it could lead companies to include digital locks to discourage illegal behavior.
CBSNews.com Legal Analyst Andrew Cohen said the affect of the high court's decision was limited.
"All ruling does is send the case back to lower court for trial based upon allegations of intent," Cohen said. "So while it is a defeat for file-sharers it is not the end of the game for them."
File-sharing services shouldn't get a free pass on bad behavior, the justices said.
"We hold that one who distributes a device with the object of promoting its use to infringe copyright, as shown by the clear expression or other affirmative steps taken to foster infringement, is liable for the resulting acts of infringement by third parties," Justice David H. Souter wrote for the court.
The justices said copying digital files such as movies, music or software programs "threatens copyright holders as never before" because it's so easy and popular, especially among young people. Entertainment companies maintain that online thieves trade 2.6 billion songs, movies and other digital files each month.
"I am pleased that the Supreme Court has considered this important case and determined that those who intentionally induce or encourage the theft of copyrighted music, movies, software or other protected works may be held liable for their actions," Attorney General Alberto Gonzales said.
The ruling represents a significant victory for Hollywood and record labels, which have resorted to suing individually the thousands of computer users caught sharing music and movies online.
"We will no longer have to compete with thieves in the night whose businesses are built on larceny," said Andrew Lack, chief executive for Sony BMG Music Entertainment.
At issue was whether the file-sharing services should be held liable even if they have no direct control over what millions of online users are doing with the software they provide for free. As much as 90 percent of songs and movies copied on the file-sharing networks are downloaded illegally, according to music industry filings.
The entertainment industry said it needed protection against the billions of dollars in revenue they lose to illegal swapping. Consumer groups worried that expanded liability will stifle the technology revolution of the last two decades that brought video cassette recorders, MP3 players and Apple's iPod.