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No iPod tax for Canada

Court action means iPods won't have extra fee attached. But it also rekindles debate over legality of file swapping.

The Canadian Supreme Court won't hear a case involving extra fees for iPods and other MP3 players in that country, ending a dispute over a so-called iPod tax, but rekindling debate over the legality of file swapping.

At issue was a long-standing law that allows a regulatory agency to collect a small extra fee on blank media such as CDs and tapes, with the revenues going to artists and record labels to recompense them for the private copies being made of their work.

That agency, the Copyright Board of Canada, said in late 2003 that iPods and other hard-drive players were being used to copy music as well, and imposed a fee of up to $25 on the devices. An Appeals Court set aside that decision last year, and Thursday's Supreme Court action will leave iPods untaxed.

The decision may have broader implications for Canadian computer users, however.

The country's trade association for record labels quickly welcomed the Supreme Court's action as a sign that unauthorized file swapping was once again viewed as unambiguously illegal.

That connection stems from another court ruling, in which a judge said that trading files though a file swapping network appeared to be legal, citing the Copyright Board's fee regime.

But if copying files to hard drives--whether on an iPod or a computer--is not included in the private copying fees, then file swapping is no longer protected, executives at the Canadian Recording Industry Association said.

"For years, those supporting unauthorized file sharing have misleadingly used the existence of the Private Copying Levy to justify illegitimate file sharing," CRIA President Graham Henderson said in a statement. "Today, the Supreme Court says 'no such luck.'"

Copyright regulators said the Supreme Court's action was regrettable, and might even make most common uses of the iPod illegal.

"The clear result of this decision is that copying recorded music onto an iPod is illegal, unless the copying has been authorized by rights holders," said David Basskin, a director of the Canadian Private Copying Collective, which collects and distributes the fees on blank media, in a statement.

The CPPC would return the fees that had been collected from iPod and other digital audio device sales between December 2003 and December 2004, the group said.

The ambiguity in Canadian law may be resolved before the courts have much time to address file-swapping issues again, however. The Canadian government has that is expected to definitively make trading copyright files online without permission illegal.