LOS ANGELES, Aug 17 (Reuters) - Handing film studios a big legal victory in a case they hope will stem video piracy, a federal judge on Thursday barred a journalist from republishing software code that unlocks scrambling on DVDs, enabling movies to be copied and swapped on the Internet.

The ruling by U.S. District Judge Lewis Kaplan in New York followed a preliminary injunction he issued earlier this year barring the defendant, Eric Corley, publisher of 2600 (http://www.2600.org), a top magazine and Web site of the hacker underground, from posting the code.

The plaintiffs in the case, which include Hollywood's biggest studios, among them Seagram Co. Ltd.'s Universal, Metro-Goldwyn-Mayer Inc., and Time Warner Inc.'s Warner Brothers, had sought a permanent injunction. They applauded Kaplan's decision on Thursday.

"Today's landmark decision nailed down an indispensable Constitutional and Congressional truth: It's wrong to help others steal creative works," Jack Valenti, chairman of the Motion Picture Association of America (MPAA), the trade group for major movie studios, said in a statement.

Lawyers for Corley and his publication, said they were not surprised by the ruling and planned to appeal.

The case represents one facet of Hollywood's growing dilemma with protecting copyrights on the Internet as millions of users share music, movies and other digital information, often for free via MP3, Napster and other technologies.

After several days of testimony in July, Kaplan ordered both sides to submit briefs by Aug. 8, outlining whether computer code could be considered a legally protected form of speech. The judge rejected arguments that computer code was entitled to free speech protection regardless of its use.

"In an era in which the transmission of computer viruses ... can disable systems upon which the nation depends and in which other computer code also is capable of inflicting harm, society must be able to regulate the use and dissemination of code in appropriate circumstance," Kaplan wrote in his ruling Thursday.

Corley, 40, has been targeted by the movie industry for publicising the existence of a software utility known as Decode Content Scrambling System (DeCSS). The free software was created by a group of European teenagers to sidestep industry-set copy protection software for video disks and to copy videos to any computer disk.

"This ruling sends exactly the right message, mainly the courts will protect intellectual property and reinforce the law Congress passed so digital content could be put out safely and effectively and not widely pirated," said Charles Sims, an attorney with the firm Proskauer, Rose, which is representing the studios and the MPAA.

Corley's lawyers said they were not surprised.

"This is what we expected. We understood that this was an issue that has to be resolved by the Supreme Court," said Martin Garbus, attorney for Corley.

Corley's lawyers have argued there were significant "fair use" and First Amendment implications in the case.

"The judge's First Amendment analysis is wrong," Garbus said. "Judge Kaplan's decision, if allowed to stand, and it will not, would cripple the free exchange of information on the Internet. It would, in interfering with free linking, stop one of the greatest hopes for the Internet. It also impedes and frustrates the development of new technologies and new software," Garbus said.

David Atlas, another attorney for Corley, said restricting Corley's ability to publish the software code was "akin to telling the New York Times you can't publish an in-depth story."

The MPAA has maintained the case simply enforces the U.S. Digital Millennium Copyright Act of 1998. It argues there are no free speech issues at stake, since the sole purpose of the DeCSS software in question is to circumvent copyright protection and gain unauthorised access to DVD, or digital versatile disk, movies.

In his opinion, Kaplan called Corley's arguments baseless.

"Defendants' constitutional argument ultimately rests on two propositions -- that computer code, regardless of its function, is 'speech' entitled to maximum constitutional protection and that computer code therefore essentially is exempt from regulation by government.

"But their argument is baseless," Kaplan said.

Some analysts were surprised by the ruling.

"The judge seemed to be favouring the free speech arguments at some points in the case and also was impressed by testimony that maintained that computer code is a language in and of itself," said Ric Dube, analyst with Webnoize.