British Telecom has lost a controversial legal test case in the US which would have paved the way for it to charge internet service providers for using hyperlinks, a key building block of the internet.

The firm took the case against the US internet service provider Prodigy Communications last year, claiming it was the inventor of the system of hyperlinks that connects Web pages, and it was therefore entitled to royalties.

In submissions to a New York court, British Telecom cited a patent filed in 1989 as evidence that it had developed the basic technology while working on a television-based information service in the 1970s and 1980s. But New York judge Ms Colleen McMahon ruled late on Thursday that Prodigy was not infringing the patent, and supported Prodigy's motion to have the case dismissed.

Judge McMahon found several problems with British Telecom's argument, including that the internet had no central computer as described in its original patent.

"We're disappointed at the ruling, but we're spending time perusing the judge's 27-page document before making our next move," said a spokesman for British Telecom yesterday.