By now, we’ve all thrilled to the gorgeous spectacle of the RIAA slapping piracy lawsuits on 12-year-old kids who live in public housing. But insiders who are close to the RIAA say their goal isn’t really to sue the minor users, the folks who take a toke and don’t inhale. No, they want to bust the real drug-pushers: The folks who have thousands, even tens of thousands, of songs on their hard drives. Aparently, this l33t group of pirates constitutes a mere one per cent of all filesharers, but create a majority of the problem; they are the sources for most of the files we download. Bust them, and you can mostly shut down MP3-swapping, right?

Except for one problem: Canada. As Jay Currie points out in a brilliant article at Tech Central Station, copying music is legal in Canada. So even if the RIAA manages to shut down these “supernodes”, they might just reappear north of the border. And the RIAA can’t strongarm Canadian prosecutors to bust those kids, because there isn’t an easy law with which to do so:

In fact, you could not have designed a law which more perfectly captures the peer to peer process. “Private copying” is a term of art in the Act. In Canada, if I own a CD and you borrow it and make a copy of it that is legal private copying; however, if I make you a copy of that same CD and give it to you that would be infringement. Odd, but ideal for protecting file sharers.

But what’s really interesting is why it’s legal to make a digital copy of your music in Canada. Back in the 90s, the Canadian music industry had gotten worried about losing revenues from people making cassette-tape copies of albums. (How quaint!) But the government suspected, even back then, that it wouldn’t be a good idea to blow millions of dollars prosecuting teenagers for making mixed tapes. So they struck an intriguing compromise: The government created a tax on blank media — specifically, blank cassettes and blank CDs — and passes the revenues on to the music industry. Every time someone buys blank media in Canada, money goes right into the music industry’s cash register, 77 cents for a CD and 29 cents for a blank tape.

To date, over $70 million has been raised from the levy. Not a huge chunk of cash, but then again, Canada is a pretty small place. If the US government struck a similar deal, it could probably start pumping an awful lot of money into the coffers of the American music industry. And if you added those levies to other blank media — such as hard drives, flash cards, or MP3 players — you could raise even more dough.

This strikes me as an eminently reasonable solution, and quite frankly, one heck of a lot easier to enforce than the byzantine digital-rights-management systems that Microsoft is trying to create. Those systems will only make life more insufferable. Technically, they’ll be designed to make a computer “smart,” so that it knows not to copy a MP3 file that’s designated as “copyrighted”. But judging by how screwy software tends to be, it won’t be long before you try to email someone a Word file at work — only to be told by your malfunctioning computer that the file is “copyrighted” and “can’t be shared over the Internet.” You just watch; it’ll happen.

So why not ditch these attempts to police individual files, throw the gates open to copying — and make the money back with levies? Many geeks have suggested a similar approach to filesharing: Why not let people pay 10 bucks a month for all the downloading they can handle? The Pew Internet Project recently estimated that 26 million adults in the US are using filesharing systems. Let’s say that we imposed the 10-buck-a-month fee. Okay, maybe half the users would get pissed off and would refuse to use paying systems. Hell, let’s say two-thirds of them refused to do so. That still leaves you with about 9 million paying users, or just over $1 billion a year in filesharing revenues. Not bad. Add that in with a levy on blank media, and you’re talking serious cash.

Of course, one could argue that a filesharing-service fee wouldn’t work: People would simply set up alternate, encrypted systems, and never pay the fee. I don’t agree. If the music industry got together with smart hackers and built their own robust, killer filesharing app — one that was devoid of spyware and adware — I think people would flock to it and gladly pay. Hell, I’d pay $10 a month just to avoid the creeptastic spycrap that comes with every new iteration of Kazaa. And don’t forget, the power of networks is in how many people are on them, and how committed those people are. If the music industry actually created a robust, powerful, non-invasive P2P program (and really, most of the existing ones are horribly designed), that one-third of people would indeed use it, and they would attract more people, and so on, and so on.

Actually, the bigger problem, I’d say, would come with imposing taxes on blank media in the US. I’m not sure the anti-tax culture of the US would tolerate it. In Canada, few people get seriously huffy about taxes; they just shrug their shoulders and, aaaahh, whaddya gonna do. In the US, it might not be so easy. Try to tax their blank CDs and they’ll blockade themselves in log cabins with Uzis and boxes of canned tuna, awaiting the eschaton.

But anyway. Politics aside, Canada has shown that it’s possible to forge a compromise — to find new money for the music industry, while keeping consumers happy.