Caving to a massive campaign by Internet services and their millions of users, the U.S. Congress indefinitely postponed legislation Friday to stop online piracy of movies and music costing U.S. companies billions of dollars every year.

Critics said the bills would result in censorship and stifle Internet innovation.

The demise, at least for the time being, of the anti-piracy bills was a clear victory for Silicon Valley over Hollywood, which has campaigned for a tougher response to online piracy. The legislation also would cover the counterfeiting of drugs and car parts.

Congress’ qualms underscored how Internet users can use their collective might to block those who want to change the system.

The battle over the future of the Internet also played out on a different front Thursday when a loose affiliation of hackers known as “Anonymous” shut down Justice Department websites for several hours and hacked the site of the Motion Picture Association of America after federal officials issued an indictment against Megaupload.com, one of the world’s biggest file-sharing sites.

The site of the Hong Kong-based company was shut down, and the founder and three employees were arrested in New Zealand on U.S. accusations that they facilitated millions of illegal downloads of films, music and other content, costing copyright holders at least $500 million in lost revenue.

New Zealand police raided homes and businesses linked to the founder, Kim Dotcom, on Friday and seized guns, millions of dollars and nearly $5 million in luxury cars, officials there said.

In the U.S., momentum against the Senate’s Protect Intellectual Property Act and the House’s Stop Online Piracy Act, known popularly as PIPA and SOPA, grew quickly on Wednesday when the online encyclopedia Wikipedia and other Web giants staged a one-day blackout and Google organised a petition drive that attracted more than seven million participants.

That day alone, at least six senators who had co-sponsored the Senate legislation reversed their positions. The Republican leader of the House Speaker John Boehner, in statements at the time and again on Friday, stressed that more consensus-building was needed before the legislation would be ready for a vote.

On Friday, Senate Majority Leader Harry Reid, a Democrat, said he was postponing a test vote set for Tuesday “in light of recent events.” House Judiciary Committee Chairman Lamar Smith, a Republican, followed suit, saying consideration of a similar House bill would be postponed “until there is wider agreement on a solution.”

With opposition mounting, it was unlikely that Reid would have received the 60 votes needed to advance the legislation to the floor of thr 100-member Senate.

The two bills would allow the Justice Department, and copyright holders, to seek court orders against foreign websites accused of copyright infringement. The legislation would bar online advertising networks and payment facilitators such as credit card companies from doing business with an alleged violator. They also would forbid search engines from linking to such sites.

The chief Senate sponsor, Judiciary Committee Chairman Patrick Leahy, a Democrat, cited estimates that copyright piracy costs the American economy more than $50 billion annually and that global sales of counterfeit goods via the Internet reached $135 billion in 2010. He and Smith insist that their bills target only foreign criminals and that there is nothing in them to require websites, Internet service providers, search engines or others to monitor their networks.

That did not satisfy critics who said the legislation could force Internet companies to pre-screen user comments or videos, burden new and smaller websites with huge litigation costs and impede new investments.

The White House, while not taking a specific stand on the bills, last week said it would “not support any legislation that reduces freedom of expression ... or undermines the dynamic, innovative global Internet.” On Friday, White House spokesman Jay Carney said online piracy is an issue that has to be addressed, “but everybody has to be in on it for it to work and get through Congress.”

The scuttling, for now, of PIPA and SOPA frustrates what might have been one of the few opportunities to move significant legislation in an election year where the two parties have little motivation to cooperate.

Until recently “you would have thought this bill was teed up,” with backing from key Senate leaders and support from powerful interest groups, said Sen. Jerry Moran, a Republican, who cosponsored the original bill but quickly dropped his backing on the grounds the bill could undermine innovation and Internet freedom.

Mr. Moran said the “uprising” of so many people with similar concerns was a “major turnaround, and in my experience it is something that has happened very rarely.”

Mr. Moran said PIPA and SOPA now have “such a black eye” that it will be difficult to amend them. Reid, however, said that there had been progress in recent talks among the various stakeholders and “there is no reason that the legitimate issues raised by many about this bill cannot be resolved.” - AP