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The entertainment industry won round one Friday in a legal battle against file-sharing hub The Pirate Bay, with guilty verdicts and one-year prison sentences handed down to four men accused of running and financing the popular site.

In its landmark ruling, the Stockholm district court convicted Gottfrid Svartholm Warg, Peter Sunde, Fredrik Neij and Carl Lundstrom of helping millions of users illegally download music, movies and computer games.

The defendants vowed to appeal, setting the stage for a lengthy copyright dispute between music and movie corporations and an online swap shop they say has deprived them of billions of dollars in lost revenue.

“We can’t pay and we won’t pay,” Sunde said in a defiant video clip posted on the Internet. Mockingly, he held up a hand-scribbled “I owe U” note to the camera. “This is as close as you will get to having money from us,” Sunde said.

All four received one-year terms and were ordered to pay damages of 30 million kronor ($3.6 million) to entertainment companies, including Warner Bros, Sony Music Entertainment, EMI and Columbia Pictures.

Lundstrom helped finance the site while the three other defendants administered it.

With an estimated 22 million users, The Pirate Bay has become the entertainment industry’s enemy No. 1 after successful court actions against file-swapping sites such as Grokster and Kazaa.

The court found the defendants guilty of helping users commit copyright violations by providing a Web site with “sophisticated search functions, simple download and storage capabilities, and through the tracker linked to the Web site.”

Defense lawyers had argued the quartet should be acquitted because The Pirate Bay doesn’t host any copyright-protected material. Instead, it provides a forum for its users to download content through so-called torrent files. The technology allows users to transfer parts of a large file from several different users, increasing download speeds.

Judge Tomas Norstrom told reporters that the site was “commercially driven,” which the defendants have denied.

The case focused on dozens of works that the prosecutor said were downloaded illegally. They included songs by the Beatles, Robbie Williams and Coldplay, movies such as “Harry Potter and the Goblet of Fire” and computer games including “World of Warcraft Invasion.”

The Pirate Bay had assured users the trial wouldn’t affect the site, and it remained operational after the verdict. Authorities temporarily shut it down in May 2006 after seizing servers and computer equipment during raids in several locations in Sweden. But it soon reappeared, running on servers elsewhere.

John Kennedy, the head of the International Federation of the Phonographic Industry, called the verdict good news for anyone “who is making a living or a business from creative activity and who needs to know their rights will be protected by law.”

File-sharing wouldn’t go away, he added, but users would likely turn to more advanced technological tools to hide their activities.

Andre Rickardsson, a computer expert and former investigator for the Swedish security police, said the ruling could encourage the entertainment industry to threaten Internet operators with lawsuits unless they block access to the site.

Sunde’s lawyer Peter Althin said he was confident that higher courts would dismiss the case against The Pirate Bay, which he described as a battle between the corporate world and “a generation of young people who want to take part of new technology.”

“It’s not as if people will turn around and say ‘oops, I’ll have to stop file-sharing now.’ Instead the reaction will be ‘oops, what can I do to protect myself from getting caught’.”

Last week French legislators rejected a plan to cut off the Internet connections of people who illegally download music and films, but the government plans to resurrect the bill for another vote this month.

The verdict comes as Europe debates stricter rules to crack down on those who share content illegally on the Internet.

Earlier this month, Sweden introduced a new law that makes it easier to prosecute file-sharers because it requires Internet Service Providers to disclose the Internet Protocol-addresses of suspected violators to copyright owners.

Opponents said the legislation would represent a Big Brother intrusion on civil liberties, while the European Parliament last month adopted a nonbinding resolution that defines Internet access as an untouchable “fundamental freedom.”

Statistics from the Netnod Internet Exchange, an organization measuring Internet traffic in Sweden, suggested that daily online activity dropped more than 40 percent after the law took effect on April 1.

The country of 9 million has one of Europe’s highest rates of Internet penetration, but has also gained a reputation as a hub for file-sharers.

Associated Press Writer Karl Ritter contributed to this report.