The music-swapping website Kazaa today announced that it had settled all lawsuits claiming it promoted Internet piracy and would work with the entertainment  industry to protect copyright.

The settlement ends litigation in the US and Australia, and promises to crack down on what industry officials said was one of the world's biggest illegal 'peer to peer' file-sharing operations.

Kazaa, which had an estimated 4.2 million users at its peak, was accused by the music industry and major Hollywood studios of being a major source of illegal copies of works distributed over the  Internet.

Today's move comes a year after the US Supreme Court ruled that Grokster and other P2P sites may be held liable for copyright  infringement if they encourage people to make unauthorised copies of songs, films or other content. This opened the door for the music industry to pursue damages.

Kazaa has agreed to pay 'a substantial sum' to the record companies and to introduce 'filtering technologies ensuring that its users can no longer distribute copyright-infringing files,' according to a statement by the London-based International  Federation of Recording Industries, representing global music labels.

Industry officials said the move marks a major step in moving consumers away from illegal music-swapping to legal purchases of online content. 'This is welcome news for the music community and the legal online music marketplace,' said Recording Industry Association of  America chairman Mitch Bainwol.

'Steadily but surely, we are passing another important marker on  the remarkable journey that is the continuing transformation and  development of the digital marketplace. The winners are fans, artists and labels and everyone else involved in making music, and our partners in the technology community,' he added.