The Copyright Board found that nothing in the process of downloading files from P2P networks implies that the source material is necessarily copyrighted, and by implication, that end users should not be responsible for knowing which files they download are copyrighted and which are not. Those who upload files, however, are still liable under Canadian law. This, of course, differs from the US copyright law that, for example, has allowed the RIAA to go after individual downloaders for copyright infringement.

At the same time, the Copyright Board imposed a levy on memory in the portable devices to which many P2P network users will copy files. The levies range up to CAD 25 (about US $19) for a portable media player with over 10GB of memory, such as the latest Apple iPods; this amounts to 3-4 percent of the retail price of such devices in Canada.

The Copyright Board also extended the current levies of up to CAD 0.77 (US $0.58) on blank cassette tapes, recordable CDs, and MiniDiscs, while denying a request for levies on blank DVDs and removable memory. Makers of portable devices and blank media will presumably pass these costs along to consumers; proceeds will go to music content owners through the Canadian Private Copying Collective, a collecting society-cum-trade association for the Canadian music industry.

It will be interesting to see how this decision plays out. Levies on recordable media are supposed to compensate content owners for copying, whether unauthorized or not. There are two potential scenarios. In one, Canadian content owners consider themselves satisfied with the revenue they receive through levies on portable music players and blank recordable CDs. In this scenario, content owners are motivated to put their own files up on P2P networks in order to drive demand for memory, which garners them revenue through levies; DRM becomes largely irrelevant.

In the other scenario, content owners are not satisfied with revenue through levies, so they continue working to stifle the proliferation of P2P networks and to develop services that use DRM and charge consumers directly for the use of digital content - services in the vein of iTunes, Rhapsody, Napster 2.0, and others in the US. In that case, consumer activists in Canada will want to expose content owners as hypocrites who want to have it both ways.

Canada is further down the path of levies as solutions to unauthorized copying than just about every other country in the world. We believe that ultimately levies are unfair solutions that are blunt instruments compared to the potential of DRM-related technologies, but they do have the advantage of being far easier to implement given a sufficiently receptive legal system. Many other countries will observe with interest what happens in Canada, as it absorbs the ramifications of last Friday's decision, and use it as input to their own decisions about DRM and levies.