Should ISPs pay music royalties for file-sharing by customers?

The music industry is fighting a desperate battle to control the unauthorised downloading of copyrighted music that leaves artists and recording companies bereft of their lucrative royalties. Peer-to-peer file-sharing services like KaZaA are seen as the biggest problem.

In the US, the Recording Industry Association of America has taken direct action against users of these services, and only this week sued 41 individuals in its latest wave of lawsuits. But the Canadian music industry is attempting a different approach.

On Wednesday, the Society of Composers, Authors and Music Publishers of Canada (SOCAN) went to the Supreme Court seeking an order that would force ISPs to pay blanket royalty fees to cover the music downloaded using their services as conduits.

SOCAN proposes that ISPs pay a royalty of CAN$0.25 per subscriber per year as well as 10% of any gross profit that ISPs make through the sale of advertising.

SOCAN also wants the court to decide whether or not ISPs should be accountable for web content hosted in other countries but accessed by Canadians.

The Canadian Association of Internet Providers (CAIP), which counts IBM, AOL and Yahoo! among its members, is defending the action. CAIP argues that royalties should be sought from web site operators rather than ISPs, who were just being used as a convenient target.

The case revolves around the definition of an ISP: is it merely a conduit for the transportation of digital information, or is it actually communicating that information in some way that makes it responsible for the content?

No decision is expected until at the middle of next year at the earliest.

In Europe, the E-Commerce Directive defines ISPs as a mere conduit of information, meaning that in general an ISP is not liable for the material transferred among its customers or hosted their web sites.