Canadians (and even their neighbors to the south) can breathe a sigh of relief as the Canadian Federal Court of Appeal quashed a proposed levy on digital music players late last week. The proposed levies weren't cheap: CAN$5 on each Memory Stick or SD card between 1GB and 4GB of memory, and "digital audio recorder" levies which top out at CAN$75 for players with 30GB+ of space.

As we reported last summer, the Copyright Board of Canada argues that Canadians who purchase digital music players and removable memory cards should pay an extra tax in order to compensate artists. This so-called "iPod Tax" would come in addition to existing levies on recordable media enforced in Canada, which are also meant to help compensate artists.

In its ruling, the Federal Court of Appeal found that "the Copyright Board erred in law when it concluded that it has the legal authority to certify the tariff that the Canadian Private Copyright Collective has proposed for 2008 and 2009 on digital audio recorders." The ruling echoes a similar finding in 2004, which also quashed an attempt to put levies on "digital audio recorders."

Technology companies largely stand opposed to such levies, as they are seen as driving prices up and hurting competition, while giving markets in places without levies (like the US) an unfair advantage. Meanwhile, consumers wonder why they need to pay a $75 tax on a 30GB+ music player if they've done nothing wrong.

Ruling still leaves much unanswered

While a victory for those that oppose such levies, the decision is disappointing on at least one level. As we reported in September, the Canadian Recording Industry Association (CRIA) withdrew its support for the iPod Tax once it realized that a legal argument could be made that such levies would give Canadians broad non-commercial rights to copyrighted materials. In short, some believed that the levy would essentially legalize P2P, and the CRIA didn't like the chances of that becoming common opinion.

That question won't be answered now, leaving the legality of ripping music to digital music players unclear in Canada, as Michael Geist notes. The matter isn't clear in the United States either, and if you press the music industry for an answer, you won't get one. The Canadian government may follow the UK's lead in explicitly describing the rights consumers have over the audio CDs they purchase. (In the UK, it was technically illegal to rip CDs before, while it has been a "gray area" question in the US and Canada according to most experts).

The Canadian Private Copyright Collective can appeal the decision, but it has not signaled its intent to do so. Given that the court acted swiftly and with little debate, we'll be surprised if they do appeal.

In the US, levies have yet to pick up steam as a potential solution to the music industry's woes, although players like Universal have been vocal at times about wanting a slice of the iPod revenue pie. Microsoft went ahead and inked a deal for its Zune player, but it's unclear what that move really did for Microsoft. It certainly didn't result in its customers having clarified fair use rights.