There are lots of problems with modern copyright (http://zacharyalberico.com/day/2012/01/24 - specific to US law, but explains some of it)

In this case though the pirate bay was a tracker/index site and didn't actually host any infringing materials. At the time it operated in Sweden this wasn't a crime. It's largely speculated that the US involved themselves to pressure Sweden to prosecute, but I don't know how substantiated that opinion is.