If you distribute software that allows users to create a peer-to-peer network whereupon they themselves distribute copyright works without permission, you are - as the author and distributor of the software itself - not liable for the infringements.

There are subtle distinctions that arise if you, the author, provide a means to supervise the users directly or maintain a centralised server of resources necessary to commission an infringement (such as an index of files), but effectively this 9th circuit judgement is a restatement of the Sony-Betamax case (if you sell a video recorder, it's not your fault if purchasers use it to infringe copyright).

A sensible result all round - but MGM (plaintiffs) will be hopping mad.
--
simon