It's scary sometimes to realize just how much the recording industry doesn't get the internet. The latest is that all of the major record labels are working on ways to raise the prices for downloadable music. In some cases, downloadable CDs on services like iTunes now cost more than the CD itself - despite the fact that there are no physical materials and no shipping costs to build into the price. Clearly, the industry still doesn't realize that part of the reason people flocked to online sharing services was because the price of a CD with one or two good songs was way too high. Among the other braindead and backwards ideas from the industry to make downloadable songs more expensive is to force buyers to buy a bad song with every good song. It's amazing. The slight success of iTunes already has the industry working on ways to kill the one just-barely smart enough idea they've had (and even that's been pretty weak overall) concerning online music.

Federal Heritage Minister Helene Scherrer yesterday promised to plug the hole in Canadian law allowing people to legally download songs off the Internet without paying. Scherrer's announcement won loud applause from an audience of Canadian music industry types at yesterday's Juno Awards opening ceremony at City Hall, which also featured a staged "surprise" appearance from Prime Minister Paul Martin.

"As minister of Canadian Heritage, I will, as quickly as possible, make changes to our copyright law," said Scherrer yesterday.

Justice Konrad von Finckenstein ruled that the Canadian Recording Industry Association didn't prove file-sharing constituted copyright violation - and artists and producers have no legal right to sue those who swap files without paying.

The court decision inspired panic in the Canadian music industry; industry spokesmen were predicting the collapse of copyright control would cause severe financial hardship for people making their living from music.

Canadian record labels had asked the court for authorization to identify 29 alleged file swappers in that country, in preparation for suing them for copyright infringement, much as the Recording Industry Association of America (RIAA) has sued more than 1500 people in America.

But the judge denied that request. In a far-ranging decision, the court further found that both downloading music and putting it in a shared folder available to other people online appeared to be legal in Canada.

In his ruling Wednesday, Judge Konrad von Finckenstein rejected that request on several grounds. In part, he said the recording industry had not presented evidence linking the alleged file swapping to the ISP subscribers that was strong enough to warrant breaking through critical privacy protections.

In that recent case, the Supreme Court ruled that libraries were not "authorizing" copyright infringement simply by putting photocopy machines near books. The libraries were justified in assuming that their customers were using the copiers in a legal manner, the high court ruled.

A study of file-sharing's effects on music sales says online music trading appears to have had little part in the recent slide in CD sales.

"We find that file sharing has only had a limited effect on record sales," the study's authors wrote. "While downloads occur on a vast scale, most users are likely individuals who would not have bought the album even in the absence of file sharing."

Even in the most pessimistic version of their model, they found that it would take about 5,000 downloads to displace sales of just one physical CD, the authors wrote. Despite the huge scale of downloading worldwide, that would be only a tiny contribution to the overall slide in album sales over the past several years, they said.

The Recording Industry Association of America was quick to dismiss the results as inconsistent with earlier findings.

A draft bill obtained by Wired News, recently circulated among members of the House judiciary committee, would make it much easier for the Justice Department to pursue criminal prosecutions against file sharers by lowering the burden of proof. The bill also would seek penalties of fines and prison time of up to ten years for file sharing.

In defending the Pirate Act, Hatch said the operators of P2P networks are running a conspiracy in which they lure children and young people with free music, movies and pornography. With these "human shields," the P2P companies are trying to ransom the entertainment industries into accepting their networks as a distribution channel and source of revenue.

"I commend Senators Patrick Leahy and Orrin Hatch for their vision and leadership in combating the theft of America's creative works," said Jack Valenti, MPAA's chief executive.

So far in 2004, Leahy has received $178,000 in campaign contributions from the entertainment industries -- the second-biggest source of donations to Leahy behind lawyers. Hatch has received $152,360.

If the draft becomes law, anyone sharing 2,500 or more pieces of content, such as songs or movies, could be fined or thrown in jail. In addition, anyone who distributes content that hasn't been released in wide distribution (for example, pre-release copies of an upcoming movie) also would face the penalties. Even a single file, determined by a judge to be worth more than $10,000, would land the file sharer in prison.

More than 532 students at 21 American universities have been sued by the RIAA which claims they were illegally sharing digital music files over the Internet.

It is the first time that the RIAA has gone for students swapping individual files. Last year four students who were at the centre of a file swapping hub were targeted.

Other suits were issued against 443 people using commercial Internet access providers were also filed in California, Colorado, Missouri, Texas and Virginia.

The RIAA President Cary Sherman said in a statement: "We are sending a clear message that downloading or 'sharing' music from a peer-to-peer network without authorisation is illegal, it can have consequences and it undermines the creative future of music itself."

However, it is not all clear cut. The RIAA has to find out who the people they are suing actually are. It will take time for the RIAA to work through the courts to force various university administrators to identify who belongs to what IP address.

A pair of coders nurturing a deep antipathy for software pirates set off a controversy Thursday when they went public with a months-old experiment to trick file sharers into running a Trojan horse program that chastises users and reports back to a central server.

The program does not permanently install itself, open a back door or harvest the user's name or other personal information. But it does "phone home" to a central server, sending the filename under which it was executed, and the amount of time the user spent staring in shock at the sermonizing text before closing the window-an average of about 12 seconds. The "Dust Bunny" revision launched last month also sends a unique I.D. number that' embedded in each copy of the program; the server logs the I.D., then sends back a new number that gets patched into the code, allowing the creators to track the program as it's re-distributed across the networks.

But Jason Schultz, a staff attorney with the Electronic Frontier Foundation, is wary of the vigilante effort. "It's sort of an invasion of your computer, not much different from other malicious programs or spyware," says Schultz. "When you use file sharing to download an application, you're not giving the person who's sending you the file permission to run rampant on your computer. The fact that they're in some ways tricking you into running it may pose some real problems for them in court."

California Assembly Bill 2735 and Senate Bill 1506 - both of which have Hollywood's support - would require anyone who knowingly disseminates commercial recorded or audiovisual material over the Internet to mark it with his or her name and address or face a possible one-year prison sentence.

"These California anti-anonymity bills would force everyone - including children - to put their real names and addresses on all the files they trade, regardless of whether the files actually infringe copyrights," says EFF legal director Cindy Cohn.

"Because the bills require Internet users to post personally identifying information, they fly directly in the face of policy goals and laws that prevent identity theft and spam and protect children and domestic violence victims."

For example, the federal Children's Online Privacy Protection Act of 1998 (COPPA) forbids collection of personally identifiable information from children online without parental consent, says the EFF.

A draft letter purportedly circulated by Bill Lockyer to fellow state attorneys general characterizes P2P software as a "dangerous product" and describes the failure of technology makers to warn consumers of those dangers as a deceptive trade practice.

The draft document, dated Feb. 26, was obtained by Wired News on March 12. Distribution of a revised version to other attorneys general is said to coincide with the spring meeting in Washington, D.C., March 15 to 17 of the National Association of Attorneys General, of which Lockyer is president. The attorney general's office plans to release a final version publicly within the coming month, after obtaining additional signatories.

However, the metadata associated with the Microsoft Word document indicates it was either drafted or reviewed by a senior vice president of the Motion Picture Association of America. According to this metadata (automatically generated by the Word application), the document's author or editor is "stevensonv." (The metadata of a document is viewable through the File menu under Properties.)

The document proposes an unprecedented legal theory with regard to peer-to-peer file-sharing services. If P2P software can be used to violate law, the argument goes, its makers should be obligated to incorporate a warning on the product or face liability for deceptive trade practices.

Pop star George Michael is abandoning the music business to release his songs online for free instead.

The multi-millionaire singer said he will never make another album for sale in record shops because he does not need the cash and does not enjoy fame.

Fans will be given the option to make donations online in exchange for downloading the tracks, and the proceeds will be given to charity.

Explaining his decision, the former Wham! frontman said: "It does two things - it takes the pressure off to have a collection of songs every so many years, which is what nearly killed me."

"I'm not pretending I won't be famous any more, but in the modern world if you take yourself out of the financial aspect of things, you're not making anybody any money, you're not losing anybody any money."