Prominent file-sharing cyberlocker Hotfile has agreed to shut down and pay $80 million in a settlement with the Motion Picture Association of America. The move follows an August decision by a federal judge in Florida who agreed with the MPAA that Hotfile did not qualify for safe harbor protection under the Digital Millenium Copyright Act. The settlement was initiated in order to avoid a jury trial that was scheduled to begin this week.

According to the MPAA press release, the court found Hotfile liable for copyright infringement and rejected its safe harbor defense under the DMCA. “This case marked the first time that a U.S. court has ruled on whether so-called cyberlockers like Hotfile can be held liable for their infringing business practices,” notes the release.

“This judgment by the court is another important step toward protecting an Internet that works for everyone,” said Senator Chris Dodd, chairman and CEO of the MPAA. “Sites like Hotfile that illegally profit off of the creativity and hard work of others do a serious disservice to audiences, who deserve high-quality, legitimate viewing experiences online.”

“The settlement amounts to a victory for Hollywood interests, which argue that cyberlockers are a vehicle for piracy,” reports GigaOM. “Opponents disagree, pointing out there is nothing inherently illegal about an online digital storage locker.”

“Ordinarily, companies that provide hosting or platform services are immune from being held liable for the actions of their users, provided they follow certain steps. In this case, the judge ruled Hotfile and its owner, Anton Titov, could not benefit from the safe harbor shield because they had actively encouraged infringement.”

According to the release, entry of the judgment against Hotfile will mark the end of litigation by the studios against the cyberlocker and Titov.