Five American movie studios have won a landmark court battle in China against a shop accused of selling pirated versions of War of the Worlds, Mr. & Mrs. Smith and other films.

The Motion Picture Association (MPA), which represents U.S. studios in international markets, says a Beijing court ruled against Yu Hao Ding DVD store and its parent company. 

The court ordered them to pay $20,100 US in compensation and to stop selling the pirated movies.

"It is a small step up a very big mountain," said Roberto De Vido, a spokesperson for the MPA.

It's estimated American studios lost $1.63 billion US in revenues in China in 2005 due to piracy.

China is flooded with pirated DVDs, selling for as little as a dollar on the streets.

The suit — brought on by Columbia Pictures, Disney, Paramount Pictures, Twentieth Century Fox and Universal City Studios — is considered a major step toward reining in China's piracy market.

Versions of recently-released films often go on the Chinese market just days after they appear in theatres in North America.

The market is fuelled by China's own film policy, which permits only 20 foreign films to be released a year. That's because officials want to protect state-run studios, which have had little success against Hollywood movies.

Foreign movies are not allowed to be shown during holidays and other times when cinema audiences are biggest.

"The maintenance of the theatrical exhibition quota, combined with the frequent imposition of blackouts on the theatrical release of foreign films … gives movie pirates a tremendous market advantage," said MPA vice-president Frank Rittman in a statement.

China has a reputation for having the world's largest film, music and software piracy industries. Copies of new movies, albums and computer programs are often available shortly after their release.

With files from the Associated Press