Kazaa users were never "monitored", Sharman Networks' technology boss claimed under questioning from Justice Murray Wilcox on Wednesday.
Phil Morle, Sharman's chief technology officer, gave evidence for the first time in the trial after Justice Wilcox called him to the witness stand.
"The real problem with this case is that there is no evidence on the way the Kazaa system works," Wilcox said before he called on Morle.
Under examination by senior counsel for Sharman, Anthony Meagher, Morle said the company had never received reports on the activity of Kazaa users.
The record companies claim Sharman can monitor what users do in the Kazaa system, but choose to ignore copyright infringement.
Meagher asked Morle: "Does Sharman monitor the activity of users in uploading, downloading files...?"
After some hesitation, Morle said: "Does Sharman?", and later said: "No".
"Perhaps you should define Sharman," Wilcox said.
Sharman's relationship to its partners such as Altnet, also being sued in the trial, has constantly been questioned in the lawsuit.
The record companies allege Sharman and Altnet are controlled by the same owner(s) to foster piracy.
"Mister Morle, you paused for some time, which suggests someone else monitors activity," Wilcox said.
"Are you aware of anyone else who monitors the activity of Kazaa users?"
"No," Morle said. The pause was due to the long nature of the question, he told Wilcox.
In an affidavit, Morle also said he had taken steps to prevent copyright infringement on the Kazaa system.
One of these involved exploring whether Kazaa could be filtered.
"As soon as I was employed by [Sharman parent company] LEF, I made enquiries of the previous developers of Kazaa as to the possibility of introducing some form of copyright filtering," he said in the affidavit.
Morle said developer Toivo Annus told him Kazaa BV had employed a consultancy to explore the possibility, but was advised it was not possible.
The aim of Sharman Networks had always been to establish peer-to-peer file sharing "as a means for members of the pubic to buy direct from content owners", Morle said in the document.
The record companies will cross-examine Morle on Thursday.
Justice Wilcox has said he would like all evidence in the trial to be heard by the end of this week.