Canadians caught downloading illegal copies of music and movies online could be slapped with a penalty of $500 under new federal copyright legislation to overhaul the Copyright Act of Canada. The act was last updated in 1997, four years before the introduction of the iPod.

The long-anticipated amendments, which Industry Minister Jim Prentice said are needed to bring Canada up to date with the rest of the digital world, triggered a flurry of heated reactions among consumers, artists and the entertainment industry Thursday. They also raised the question of who will have to play the role of copyright cop on the Internet.

Industry groups applauded the government for finally tabling the legislation, which they say will help to protect the intellectual property of thousands of artists and distributors.

Critics say the new legislation too closely resembles the U.S. Digital Millennium Copyright Act, which has been criticized as too stacked against consumers in favour of rights holders such as the movie and recording industries. They fear it could force ordinary Canadians to pay thousands of dollars in penalties for copying their own legally purchased music to CDs or uploading videos to sharing sites such as YouTube.

"This is a unique made-in-Canada approach to copyright reform," Mr. Prentice told reporters during a news conference on Parliament Hill yesterday. "This bill balances the rights of creators on one hand and consumers on the other."

The bill emphasizes cracking down on those Internet users who upload and share files, setting much higher penalties than for downloaders.

Catharine Saxberg, executive director of the Canadian Music Publishers Association, said the new legislation is an important first step toward recognizing the importance of intellectual property rights in Canada. "Canada punches far above its weight internationally in terms of our intellectual property industries and we have long needed the government to recognize that, so hopefully this law will be the beginning of an ongoing recognition of the products of the mind and creative endeavours," she said.

But some artists were quick to criticize chastise the new legislation.

"The question is, who gains from this bill?" said Brendan Canning, a member of the Canadian Music Creators Coalition and a co-founder of the band Broken Social Scene. "It's not musicians. Musicians don't need lawsuits..... What we do need is a government that is willing to sit down with all the stakeholders and craft a balanced copyright policy for Canada that will not repeat the mistakes made in the United States."

The current Copyright Act allows for a maximum fine of $20,000 for each instance of copyright infringement, whether downloading or uploading, although Canadian file sharers have yet to face the same lawsuits that have been launched by record companies in the United States.

Under the new legislation, the maximum amount of statutory damages a court could enforce would be $500 for all infringements contained in a lawsuit, although a judge could still award other penalties.

What has some critics especially concerned about the bill is that uploaders and anyone caught hacking "digital locks" - such as copy controls or digital rights management (DRM) technology - could face damages of up to $20,000. The digital lock provisions could lead to thousands of dollars in penalties for average Canadians, said University of Ottawa law professor Michael Geist.

"Fundamentally, it really has a direct impact on what people can do with all sorts of consumer products ... that are now subject to certain limitations with potentially huge damage awards for Canadians that violate the rules," Prof. Geist said.

"All Canadians should be worried. The digital lock provisions, which are really the core of this legislation, are in many ways worse than the U.S. [laws]."

Prof. Geist has become and unofficial spokesman for less regulation in copyright enforcement. The Facebook group he helped start - called Fair Copyright for Canada - has attracted more than 43,000 members and has spawned a series of regional chapters across the country. The group was instrumental in creating a groundswell of grassroots support to derail the last set of proposed changes to the Copyright Act.

Music labels in the U.S., led by the Recording Industry Association of America have filed more than 28,000 lawsuits against individual file sharers. Only one suit has made it to trial, that of Jammie Thomas, a single Minnesota mother who was ordered to pay $222,000 by a federal jury last October on 24 counts of copyright infringement.

TV viewers would also be affected by the new legislation, which would make it legal to record shows, something which is currently illegal. Canadians would not be allowed to keep the recordings forever in digital stockpiles, nor would they be allowed to record certain programs flagged with digital locks by broadcasters.

Although digital locks - sometimes called copy control or digital rights management (DRM) technology - are slowly fading away from the music business with the rise of the universal MP3 format, they are very much a staple of the movie industry where it remains illegal to copy a movie from a DVD.

But one big question remaining is who will police the new digital frontier.

The new legislation calls on Internet service providers (ISPs) to discourage copyright infringement, but these companies will not be held liable for the actions of their users.

In some countries - such as the U.S. and Australia - ISPs have been directed to track subscribers who swap files illegally and to block access to certain sites and programs which facilitate file sharing.

Under the new Canadian legislation, ISPs would be obliged to inform subscribers when a complaint has been launched against the consumer by the owner of a copyright; however, they would also be obliged to keep track of that user's contact information for six months in the event that the data became necessary for legal proceedings.

Those provisions will have serious privacy implications for service providers, said Rocky Gaudrault, chief executive officer of TekSavvy Solutions Inc., an independent ISP based in Chatham, Ont. "Where is the line drawn between the Privacy Act versus this new copyright bill?" he said.

Typically, ISPs release the personal contact information of their subscribers only for police requests, usually in cases involving identity theft or child pornography. Having to track users' data based on requests from industry groups presents a sticky situation, he said.

"We are not an arm of the law or an agency of the state and they're talking about situations that may become very bad overall," he said. "We're there just as an on ramp to the Internet, and to go and police the Internet, that's not our job."

A spokeswoman for Bell Canada said the company was pleased to hear that ISPs will not be held accountable for the actions of their users and that the process for passing along notices from copyright holders to Internet users believed to be swapping illegal files would be formalized.

If the proposed legislation is passed, it could have effects on other copyright measures currently in place. While Stephen Waddell, national executive director of the Alliance of Canadian Cinema, Television and Radio Artists said the new legislation is largely positive, he worries it could lead to the end of the private copying regime which imposes a levy on blank tapes and CDs sold in Canada.

"We're concerned if there is any effort here by the government to permit format shifting or this form of copying without ensuring that performers and makers receive compensation as they have up until now through the private copying regime."

Mr. Prentice said the government will be launching public consultations regarding the private copying regime in the fall. Mr. Waddell said ACTRA would not only oppose scrapping the regime, but would like to see it extended to include levies on iPods and other digital devices.

The federal government announced its intention to update the Copyright Act in its 2007 Speech from the Throne, and promised a number of organizations in the recording and media industries that the legislation would be tabled before the House of Commons breaks for the summer.

However, with Parliament set to break soon, some sources expect the legislation to be left to die by the minority Conservative government, which is likely to face harsh criticism from opposition parties, making the bill difficult to pass.