PARIS--French lawmakers on Thursday rejected a tough new Internet piracy bill that would cut off illegal downloaders, in a surprise setback for President Nicolas Sarkozy's government.

But the government played down the bill's defeat in the National Assembly, saying an amended version would be put before parliament in the coming weeks.

One of the world's toughest Internet piracy bills, the French "creation and Internet law" would set a precedent for global efforts to stamp out the online piracy of music, films and video games.

Under a "three-strike" system, a new state agency would send illegal downloaders an e-mail warning, then a letter, and suspend their Internet account for up to a year if they are caught more than twice.

Approved earlier by the Senate, France's upper house, the bill was defeated by a vote of 21 to 15 in a near-empty lower house.

Two members of Sarkozy's right-wing majority joined the left-wing opposition in voting against, in protest at the last-minute reinstatement of a provision saying banned users must continue to pay their Internet bills.

The French move to ban illegal downloaders, which replaces current penalties of up to three years in prison and 300,000 euros (398,000 dollars) in fines, would mark a world first if approved.

Similar plans in New Zealand were derailed by protests earlier this year, and several European countries including Britain, Germany and Sweden have decided against cut-off measures.

In both the United States and Ireland, the record industry has enlisted Internet Service Providers (ISPs) to help root out online piracy.

Several major US access providers have started sending out warning letters to illegal downloaders with suspension as a last resort threat, but reports suggest only a handful of users have been banned.

One in three of France's 30 million web users admit to downloading music, films or video games on the Internet, and the record industry blames piracy for a 50 percent collapse in sales figures.

The French bill is backed by the international film and record industries, and more than 10,000 French artists, filmmakers and musicians, from Johnny Hallyday to Catherine Deneuve, have signed a petition in its support.

Supporters of the bill hope the threat of being cut off will wean web users away from pirated films and music, and towards fledgling legal download sites.

But the scheme has been attacked by consumer groups, who complain users would be cut off before having a chance to challenge the accusations.

The Socialist opposition charges that it amounts to state surveillance of the web since copyright holders would be able to access data on web traffic to track down and report illegal downloaders.

The French telecoms federation opposed the ban as a "disproportionate" response to piracy and a major technical headache for access providers.

A French umbrella group representing 180 high-tech and online businesses had urged the government to shelve the bill and allow the industry to come up with a better answer to piracy.

Internet experts also warn the bill has been overtaken by technology, since it targets file-sharing or download sites just as piracy is shifting towards easy-to-use video streaming websites.