The teenage creator of a file-sharing site popular with computer gamers has shelved a search for investors in the light of the music industry's action against song-swapping service Napster.

More than 500,000 users have downloaded the Swapoo software since it was first offered at the end of July by 17-year-old Jeffrey Freeman, and more than 110,000 files are now posted for exchange on his site.

Inspired by Napster's design, Swapoo can be used to exchange any type of file, from word-processing programs to video clips

Until recently, many of these were illegal copies of video games, called Rom files, used in consoles such as those made by Nintendo and Sega.

Mr Freeman, who created the system because he wanted something to put on his cv, says he was amazed by the response. It also attracted the attention of Shervin Pishvar, chief executive officer of WebOS, who recruited Mr Freeman as a programmer and now advises him on developing Swapoo as a business.

Mr Pishvar is wary, however, of the legal problems encountered by Napster and advised Mr Freeman to "cool it".

"Jeff needs to ask himself: 'If it is going to be a business, what kind of business will it be?'," Mr Pishvar said. "Initially the system was very open to file sharing of illegal files and that's one of the things I told him he doesn't want to do. I've advised him to sort out Swapoo's legal position before approaching investors."

Sega recently began hunting sites hosting illegal Roms of its games, and so far has shut down 220 of them.

Mr Freeman said he had not received legal threats from any games companies but has added rudimentary filters to bar Rom files of games from being traded through Swapoo.

"We do not condone sharing of illegal files and we have a procedure in place to ban users from the network if they use it illegally."

But rights owners are stepping up their war on file-sharing services that could be used to distribute pirated material.

This week Steve Heckler, senior vice president of Sony Pictures Entertainment, warned: "The industry will take whatever steps it needs to protect itself and protect its revenue streams It will not lose that revenue stream, no matter what."

He told the Americas Conference on Information Systems that Sony would counter file-sharing systems. "We will develop technology that transcends the individual user. We will firewall Napster at source. We will block it at your phone company, we will block it at your ISP."