The three individuals - founders Peter Sunde and Fredrik Neij, both 32, and financier Carl Lundstroem, 50 - were originally charged of promoting copyright infringement with the website The Pirate Bay in April of 2009.
Each individual was sentenced to one year in prison, in a verdict widely considered to be a major decision within the film and recording industries, as well as third founder Gottfrid Svartholm Warg, 26. Warg was absent from the trial due to an illness.
The sentences were shortened by the appeals court to ten months for Neij, eight for Sunde and four for Lundstroem.
"Each one will be punished only for the acts he has committed himself," said judge Ulrika Ihrfelt to the Swedish news media.
With the reduced sentencing, however, came a price for the three men: the court also ruled that instead of paying 32 million kronor (roughly 3.4 million euros/4.5 million dollars) in damages to the movie and recording industries, the amount should be increased to 46 million.
"This is because the Appeals Court to a larger extent than the district court has accepted the plaintiffs' presented evidence of their losses," the court said in a statement to AFP News
The peer-to-peer torrenting website has been running since 2003, and the individuals behind the group have maintained the legality of their website, claiming that the filesharing services were able to be used legally as well as illegally.
They have vowed to take their case to the Supreme Court if necessary, continuing their lengthy legal battle for as long as possible.