Tiscali has suspended its Juke Box music sharing site after being told to remove the "search by artist" function.
The International Federation of the Phonographic Industry (IFPI) said the service breached the agreement under which Juke Box operated.
Tiscali Juke Box was launched in April as a legal P2P service where users could listen to songs but not copy or download them.
Although royalties were paid for "non-interactive rights" to songs, the IFPI ruled that the artist search function offered too high a degree of interactivity by streaming chosen tracks on demand.
Interactive rights have to be negotiated with individual recording labels.
Tiscali is clearly frustrated by the ruling. In an open letter to the European recording industry that is posted at the former Juke Box website, Mario Mariani, SVP Media and VAS, Tiscali Services, writes the subject line: "The European recording industry is virtually impossible to work with in the promotion of legal music online".
The letter points out that the system has been developed on a platform—Mercora—that has legally operated for over year in the US.
He continues: "It is important to underline that this affair not only has an impact on Tiscali Juke Box but on the entire market for the legal online distribution of music".
Richard Ayers, editor at Tiscali.co.uk said, "We were trying to develop a new and innovative service in order to increase the appreciation of music, and indeed the purchasing of music. It was clearly working".
Not any more.