If imitation is truly the sincerest form of flattery, then 2004 can be chalked up as a year of love notes addressed to Apple Computer's iTunes Music Store.

From the opening days of the year, many of the technology and music world's biggest companies were rushing to create their own music download services, following Apple's lead. Portal giant Yahoo, for instance, worked on building its own service in-house and ultimately bought Musicmatch for $160 million to complete one of the year's biggest Net acquisitions.

And over the course of the year, Wal-Mart Stores, Sony, Microsoft, Virgin Digital, eBay and other giants all launched their own music download stores.

So far, they've made only minor inroads. By late 2004, analysts said Apple still commanded a 70 percent market share in the digital music download business.

Many of those rivals continued to chafe under Apple's lock on the popular iPod digital music player, which will not directly play songs purchased from any online music store other than iTunes. RealNetworks released technology in July that allowed its own songs to be played on the iPod, kicking off a feud with Apple and temporarily jump-starting its own sales. With its iPod Photo, Apple followed through on its promise to break that compatibility.

Apple spent as much time fighting individual hackers who turned the iTunes software into a file-sharing tool, however.

While the market for legal downloads picked up steam, the file-sharing world continued to move forward, bolstered by a string of legal decisions.

A judge ruled in March that file sharing is legal in Canada. Several months later, a U.S. Court of Appeals ruled that peer-to-peer software companies such as Streamcast Networks and Grokster are not responsible for the illegal actions of their users, allowing the networks to continue growing.

Entertainment companies contested that decision, and the Supreme Court accepted their appeal in December, setting the stage for a 2005 decision that could have ripple effects throughout the technology industry.

Overseas, Kazaa parent Sharman Networks battled record labels in Australian court in a copyright case that shone a spotlight on the secretive company's operations and threatened its financial future.

Record labels continued to file lawsuits against individual file swappers, and the movie studios added their own suits late in the year. But traffic on file-trading networks continued to grow, with eDonkey and BitTorrent taking Kazaa's title as the most popular peer-to-peer networks in the world.

Former file-swapping rebels, led by Napster founder Shawn Fanning, began working to reconcile the peer-to-peer world and record labels, however. Fanning's new company, Snocap, is aimed at turning file-trading networks into song sales services, with help from the labels themselves.

The court rulings in peer-to-peer networks' favor prompted a strong congressional drive to change the law on file swapping so that the companies could be held responsible for piracy and individual swappers could face criminal charges. Those ideas were derailed on Capital Hill after opposition from technology companies but are likely to return in 2005.

--John Borland